PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — BRITISH PRISONERS OF WAR, FAR EAST

Sir Geoffrey Shakespeare: asked the Secretary of State for Foreign Affairs what improved arrangements have been made for giving information to relatives about prisoners of war, particularly those in the Far East.

The Secretary of State for Foreign Affairs (Mr. Eden): His Majesty's Government have examined this question very carefully. While they are satisfied that it would not conduce to speedy or efficient dealing with inquiries from relatives if the various Government Departments concerned ceased to deal with matters for which they are responsible, they are impressed with the need for a special Inquiry centre which would be able to deal with all inquiries from relatives of prisoners of war in the Far East who were uncertain which Department to approach. Steps are accordingly being taken to set up such a centre, and an announcement on the subject will be made at a very early date.

Sir G. Shakespeare: Will my right hon. Friend give us an assurance that the head of this new inquiry centre will be given sufficient status to secure immediately, from any Government Department, the necessary information in relation to anything?

Mr. Eden: Yes, Sir, I think I can certainly do that, because the object of this proposal is to make matters smoother and easier, and it is necessary to provide him with sufficient authority.

Miss Ward: Will the Foreign Office be responsible for this information department?

Mr. Eden: I do not know. I had not thought about responsibility. I have a few responsibilities. I will consider it.

Oral Answers to Questions — GREECE

British Officer's Death

Mr. Keeling: asked the Secretary of State for Foreign Affairs whether he can now give further information about the death of a British officer with the E.D.E.S. guerillas in Greece; and whether he has any evidence that the E.L.A.S. knew of his presence with the E.D.E.S.

Mr. Eden: Yes, Sir. The British officer was with an Allied mission attached to an E.D.E.S. band. The E.D.E.S. guerillas left the village in which they were stationed at the approach of an E.L.A.S. force, but the Allied mission remained in their house and were still there when the E.L.A.S. force entered the village. Shortly afterwards, the British officer was shot by an E.L.A.S. guerilla just outside the house. These events took place last October, but it was only on 1st March that information was received that an inquiry into the matter had been conducted in Greece. The results of this inquiry only reached Cairo at the end of last month and are being urgently examined there. A copy of the report is being forwarded to London.

Mr. Keeling: May I ask whether, if the further examination shows that the charge of murder was based upon incorrect information, my right hon. Friend will make a further statement?

Mr. Eden: Yes, Sir. Obviously I must not prejudge the position, and I can say no more until I have got the document and the matter has been fully examined. Clearly, if there has been any misstatement, we should wish to put it right.

Armed Forces (Disorders)

Mr. Parker: asked the Prime Minister whether he will make a statement on the crisis which has arisen among the Greek armed forces in the Middle East; and whether, in expectation of a political settlement which now seems possible by the formation of the Venezelos Government, he will assist the restoration of normal conditions in the Greek armed forces by securing an amnesty to those who were involved.

The Prime Minister (Mr. Churchill): am able to inform the House that the disorders which recently broke out in the Greek Army and Navy have now been almost completely cleared up. It is for the Greek Government to decide what measures shall be taken against those who were responsible for these deplorable incidents in their Forces. It must be remembered that a British officer was killed.
In the hope of putting an end to political disunity the King of Greece has already declared his intention of forming a Government as representative as possible, made up of all trends of patriotic opinion to the exclusion only of those who have collaborated with the enemy against their fellow countrymen in the common cause. His Majesty's Government are in full agreement with this policy and will give the King of Greece and his Government all possible support in its execution.

Mr. Parker: Will the Prime Minister do everything possible to see that the interests in Greece that are now fighting against the enemy are fully represented in that Government, and give an assurance to the Greek people that we shall not attempt to force King George upon them against their wish?

The Prime Minister: We shall certainly try to get representatives in that Government of those who are really fighting the enemy; some of them seem to be more busy fighting their own countrymen. With regard to the future of Greece, it has been repeatedly stated that we shall not interfere with the decision of the Greek people, once normal conditions have been more or less restored.

CZECHOSLOVAKIA (DR. BENES)

Commander Sir Archibald Southby: asked the Secretary of State for Foreign Affairs whether the Government now recognises Dr. Benes as being the President of Czechoslovakia.

Mr. Eden: Yes, Sir.

Sir A. Southby: Is it not a fact that Dr. Benes voluntarily resigned the Presidency of Czechoslovakia on 5th October, 1938? By whom has he been re-elected? Will my right hon. Friend, further, bear in mind in dealing with occupied countries, including Czechoslovakia, when these questions arise, that it is not necessarily

only the Fascists and the Nazis who may seek to set up Quisling governments?

Mr. Eden: I am not quite sure that follow my hon. and gallant Friend. We made, if I remember aright, an arrangement, which was announced and approved by this House—I think it was about three years ago—and by it we resumed our relations with Dr. Benes and the Czechoslovakian Government which is here.

Sir A. Southby: Is not my right hon. Friend aware that Dr. Benes is not now, in fact, the President of Czechoslovakia, he having himself abdicated?

Sir Herbert Williams: He has re-elected himself.

Mr. Eden: That is not the position which His Majesty's Government take up.

Mr. Mander: Is it not a fact that this outstanding statesman is supported by all the people of his country?

UNITED NATIONS (FLAG)

Mr. Mander: asked the Secretary of State for Foreign Affairs if he will consider the advisability of consulting with other members of the United Nations with a view to the adoption of a flag, emblem or other symbol to be used, in addition to national emblems, as a visual expression of Allied unity both during the war and in the building-up of the new world peace organisation decided on at the Moscow Conference.

Mr. Vernon Bartlett: asked the Secretary of State for Foreign Affairs whether he will consult the leaders of the other United Nations as to the advisability of adopting a United Nations flag, in order to make clear the international status of U.N.R.R.A. and other United Nations commissions which will be called upon to co-operate in areas now under enemy control.

Mr. Eden: I would refer my hon. Friend to the reply which my right hon. Friend the Minister of State gave to the hon. Member for Maldon (Mr. Driberg) on 29th June, 1943. As stated on that occasion, this matter is one which concerns all the United Nations, whose views are unlikely to have been formulated as yet. His Majesty's Government doubt, there-


fore, whether the very complicated discussions, in which it would be necessary to engage if my hon. Friend's suggestion were adapted, would produce any fruitful result or reveal any consensus of opinion at present. Moreover, these consultations would inevitably take a very long time, and I do not think that this is quite the moment to embark upon them.

Mr. Mander: Is any flag being used by U.N.R.R.A., or similar organisations, at the present time?

Mr. Eden: Not that I know of.

Mr. Bartlett: Cannot the British Government take the initiative in a matter like this? Why must 'we always say: "This is a matter for all the United Nations"? Would it not be much more impressive to have one flag flying over Hitler's palace in Berlin than a couple of dozen flags, for all the United Nations?

Hon. Members: No.

Mr. Eden: I think that is a matter of assessment.

Mr. Gallacher: Is it not a fact that all the principal flags, whatever their other colours, have a piece of red on them?

Mr. Eden: The hon. Gentleman has most helpfully illustrated the difficulties which might arise.

Mr. Mander: In view of the unsatisfactory nature of the reply, I beg to give notice that I will raise this matter on the Adjournment.

LEAGUE OF NATIONS BUILDINGS, GENEVA

Sir Irving Albery: asked the Secretary of State for Foreign Affairs if he has any information as to the use which is being made, at present, of the League of Nations buildings in Geneva.

Mr. Eden: Apart from the offices occupied by the Acting Secretary-General and a comparatively small staff of officials and clerks, and the library, which is open to the public, the greater part of the buildings of the League of Nations at Geneva is at present closed.

Sir I. Albery: Has consideration been given to the possibility of making these premises serve some useful purpose?

Mr. Eden: I should like to have notice of that Question, although I do not think we can do much about it.

Colonel Greenwell: Could they be used as a hospital to nurse the League of Nations back to health?

BRITISH FOREIGN POLICY, 1919–1939 (DOCUMENTS, PUBLICATION)

Miss Ward: asked the Secretary of State for Foreign Affairs if he can give an assurance that, in connection with the proposed publication of certain documents relating to events prior to the outbreak of war, all the relevant documents of the period including diplomatic and service despatches will be included.

Mr. Eden: As I said in reply to the hon. Member for Stoke on Trent (Mr. Ellis Smith) on 25th March, the proposal is to publish the most important documents in the Foreign Office archives relating to British foreign policy between 1919 and 1939. The aim will be to present a full and accurate historical record, and all the documents necessary to this end will be included in the collection.

Miss Ward: Who is to be in charge of this publication? Also, will the actions taken by politicians on the recommendations made by the Foreign Office to the Cabinet be included in the issue?

Mr. Eden: Professor Woodward has undertaken this task, and I think we are fortunate in getting so distinguished a historian for the purpose. As regards documents, everything in the Foreign Office is available to him.

Miss Ward: Owing to the very limited nature of the reply, may I give notice that I will raise the matter on the Adjournment?

NEUTRAL COUNTRIES (EXPORTS TO GERMANY)

Mr. G. Strauss: asked the Secretary of State for Foreign Affairs what replies he has received to the representations made to the Governments of Turkey, Sweden and Portugal in regard to the despatch from those countries to Germany of vital war materials.

Mr. Eden: As regards the representations which His Majesty's Ambassador at Angora and his United States colleague recently made to the Turkish Government on the general question of economic assistance to Germany, I am happy to tell the hon. Member that the Turkish reply was most friendly and co-operative in nature. He will also have heard of the announcement made in the National Assembly by the Turkish Minister for Foreign Affairs that, as from 21st April onwards, the Turkish Government had decided to prohibit the export of chrome to Germany or her Allies. I should add that at the same time the Minister for Foreign Affairs made it clear that Turkey would continue to supply chrome to the United Kingdom. As regards Sweden, I understand that my hon. Friend, the Parliamentary Secretary to the Ministry of Economic Warfare, is making a statement after Questions. As regards Portugal negotiations are still in progress with a view to limiting the export of wolfram to Germany. I hope shortly to be in a position to make a statement on this subject.

Mr. Strauss: In regard to Portugal, which country seems the most unhelpful, can the right hon. Gentleman not make representations to the Portuguese Government that the people of this country will not forget that thousands of their sons owe, and others probably will owe, their deaths to the twenty-fold increase of wolfram supplies from Portugal to Germany?

Mr. Eden: I am not sure that I accept the hon. Gentleman's figures and I am not sure that they are right, but I think I can say that we have made it quite plain to the Portuguese Government that we think we have a right to ask that this traffic shall cease.

POLISH FORCES, GREAT BRITAIN

Mr. Driberg: asked the Secretary of State for Foreign Affairs if his conversations with the Polish Government on the question of anti-Semitism in the Polish forces in this country have now been reopened; if he can give any account of the progress of these conversations; and if the subjects discussed or to be discussed include the possibility of the transfer to the British Forces of those Jews still remaining in the Polish Forces who desire such transfer.

Mr. Eden: His Majesty's Ambassador to Poland, on my instructions, has brought to the attention of the Polish Government the full report of the Debate which the House held on this subject on 6th April. He has impressed upon the Polish Government the great importance which His Majesty's Government attach to the Polish Government continuing and intensifying their efforts to eradicate any manifestations of anti-Semitism, in the Polish Forces stationed in this country and taking all the steps open to them to ensure that their policy is translated into appropriate action in the lower ranks of the Polish Army. The Polish Government have kept His Majesty's Government informed of the course of the inquiries which they have instituted. Those inquiries are not, however, completed and I am not yet in a position to make a further statement on the matter. As I stated in reply to the hon. Member on 5th April, I am not now prepared to discuss with the Polish Government the possibility of further transfers of Polish Jews from the Polish to the British Forces and this matter was not included in the above conversations.

Mr. Driberg: If, as the latest Polish Government statement alleges, there are comparatively few Jews who are unhappy or persecuted in the Polish Forces, does not that materially simplify the problem of any transfer, from an operational point of view? If only a few dozen or so are involved, it would surely not dislocate our invasion plans?

Mr. Eden: It is not really a question of the dislocation of our invasion plans. I think the House will understand how delicate and difficult it is from the point of view that here we are, as we all know, with great operations impending. I do not think it is really practicable for me to urge an Allied Government to allow some of their Forces to be transferred to our Forces.

Mr. Mack: In any further representations to the Polish Government will the right hon. Gentleman's Department use the bluntest possible language, and say that this kind of treatment must not be applied to any rank, and that, in addition, the Polish military authorities in this country, who have violated every principle of democracy—

Hon. Members: Order.

Mr. Speaker: If the hon. Member is making any comment on the proceedings of a court-martial that is out of Order.

Mr. Mack: I apologise if I have made a mistake and if I have unintentionally rendered myself liable to misunderstanding. May I put it this way? Will my right hon. Friend in the course of any further representations he makes to the Polish Government, point out that this House has not been satisfied—[HON. MEMBERS: No"]—with the previous statement and will he see, in addition, that these non-Jewish Russian Poles are also saved from similar treatment?

Mr. Eden: I thought my answer made it plain that we have spoken in the frankest, as in the friendliest, terms to an Allied Government. I am quite convinced myself from what has been said by the Polish Prime Minister himself that everything possible is being done by the Polish authorities. I hope the House will not adopt any contrary assumption, which I am sure is mistaken.

Mr. Frankel: In view of the possibility of great dissatisfaction arising in the Polish Forces, which might be inimical to any Allied action, will the right hon. Gentleman reconsider the request made to him in the Question?

Mr. Eden: The hon. Member means about the transfer? I am extremely sorry, but I have explained that at the present juncture I cannot put pressure on a Government, or invite any Government, to allow any part of their Forces to transfer themselves to our Forces.

Mr. Silverman: Is the right hon. Gentleman aware that at the same time as the Polish military authorities are insisting on retaining Polish Jews in the Polish Army, the Polish naval authorities are refusing to allow British Jews serving in the British Navy, to serve in Polish destroyers and are insisting that they shall be put ashore even though they are members of British naval detachments manning ships lent by the Admiralty?

Mr. Eden: I know nothing of that. I will be glad if the hon. Member will give me any evidence, but it does not affect the main thesis, which I feel I must lay down, that at a time like this, I cannot encourage the transfer of Forces from one country to another.

Mr. Driberg: asked the Secretary of State for Foreign Affairs if he is aware that some 30 Jewish Servicemen have been sentenced by Polish courts-martial, under authority granted to Allied Governments in this country by Parliament, to terms of imprisonment of from one to three years, although the circumstances in which these men were arrested were similar to those in which about 200 other Jewish Servicemen and women were transferred recently from the Polish to the British Army without punishment; and if he will negotiate with the Polish Government to secure the commutation of these sentences.

Mr. Eden: I am informed that 21 soldiers have been sentenced and that the sentences vary between one and two years' imprisonment. They were charged with absenting themselves without leave with the intention of evading service in the Polish Army. One year's imprisonment is the minimum sentence laid down for this offence in the Polish military code; the maximum sentence is 15 years.
As I stated in reply to the hon. Member on 5th April, the arrangements made for the transfer of some 200 Polish Jewish soldiers to the British Forces constituted an entirely exceptional departure from normal practice. Since that time, the Polish authorities have instituted a full inquiry into the men's grievances and have taken steps to remedy them. Moreover, on 13th March, the Polish Minister of National Defence issued an order to the Polish Army, in which he warned all ranks that the pardon granted to the earlier deserters must not be regarded as a precedent, and that in future the penalties provided by law for desertion in wartime, would be enforced against all who refused to do their duty as Polish citizens, The men recently sentenced all absented themselves from their units after this order had been issued.
In the circumstances, I regret that I am not prepared to intervene in the manner which the hon. Member suggests, understand, however, that the sentences are subject to confirmation by higher Polish military authority. I am sure that in considering the matter the Polish authorities will give full weight to the extenuating circumstances.

Mr. Driberg: Is the right hon. Gentleman aware that, although they absented


themselves after that warning, it was only because conditions had not in fact been ameliorated by the excellent instructions issued by the Polish Government, and therefore the circumstances were really precisely the same as those in which the previous groups were accepted by us?

Mr. Eden: I do not think so. I have carefully considered this matter. It has also been considered by the Cabinet. With every desire to do what we can in the matter, I think that my answer goes as far as we can go.

Mr. Ivor Thomas: Is the right hon. Gentleman aware that a state of things highly prejudicial to discipline in the Polish Army would be created, if it got abroad that deserters could secure the protection of the British Parliament?

Colonel Sir A. Lambert Ward: Is it not a fact that most of these soldiers have returned to duty while awaiting confirmation of their sentence?

Mr. Eden: I think that is so. I am not quite sure.

Commander Locker-Lampson: Will the Foreign Secretary use his kind offices to enable those of us who feel strongly on this matter to meet Polish representatives to plead the case of these unhappy people?

Mr. Eden: My right hon. Friend the Prime Minister has himself seen the Polish Prime Minister on this subject, and I do feel that perhaps we ought to continue to use the ordinary channels.

Mr. Rhys Davies: Can the Foreign Secretary see to it in dealing with this problem that none of these Polish soldiers shall be punished on British soil in excess of that which would be imposed on British soldiers for similar offences?

Mr. Eden: I think it is quite clear from the answer I have given that that is not so.

Major-General Sir Alfred Knox: Is it not evident that the Polish military authorities are doing their very best to stamp out this anti-Semitism; and are there not limits which prevent us from interfering with discipline in the Polish Army?

Mr. Astor: Is not the equivalent punishment in the British Army, imprisonment for life?

Mr. Driberg: In view of new facts which have come to light, and the new situation which has arisen, I beg to give notice that I shall raise this matter on the Adjournment on Friday of this week.

Mr. Price: asked the Secretary of State for Foreign Affairs whether he is aware that a number of Ukranian, White Russian, and other Orthodox Christian soldiers of the Polish Army have recently absented themselves without leave, on the grounds of certain grievances which they allege they suffer from; that these men are now liable to court-martial; and whether he will use this good offices with the Polish Government to see that these grievances are redressed.

Mr. Eden: Yes, Sir, I am aware of this case and have instructed His Majesty's Ambassador to Poland to seek further information on the subject urgently from the Polish Government.

Mr. Price: In view of the fact that these Orthodox Christian soldiers of the Polish Army have lost whatever roots they ever had in Poland, and therefore are not spiritually part of the Polish Army, will my right hon. Friend see that, if it is technically possible, they shall be transferred to the British Army?

Mr. Eden: We have approached the Polish Government on the subject, and I must surely allow them to give us their statement.

ITALY (TRADE UNIONISTS' VISIT)

Commander Galbraith: asked the Secretary of State for Foreign Affairs the purpose for which facilities have been granted to trade union representatives to visit Italy.

Mr. Eden: Facilities were granted at the request of the Trades Union Congress for the visit to Italy of one or two trades union representatives, in order that they may be able to ascertain the possibilities of organisation among the Italian workers and the possibilities of rebuilding the Italian trade union movement. The purpose of the visit is purely exploratory.

Commander Galbraith: Is it the intention of the Government to grant similar facilities to members of other associations desiring to proceed to Italy in the interests of post-war trade, or for other purposes?

Mr. Eden: No other request has been received. This request was made to the Government, and it was considered, and we saw no reason to object to it. If my hon. and gallant Friend has other proposals no doubt he will let me know?

Commander Galbraith: Would they be considered sympathetically?

Mr. Eden: That is what we always try to do.

Mr. Gallacher: Would it not be possible for the young Tory Progressives to go to Italy?

BRITISH OVERSEAS AIRWAYS CORPORATION

Rear-Admiral Sir Murray Sueter: asked the Secretary of State for Air what sums of public money have been paid to, or expended on behalf of, the British Overseas Airways Corporation for each of the financial years 1940–41, 1941–42, 1942–43 and 1943–44.

The Joint Under-Secretary a State for Air (Captain Harold Balfour): With my hon. and gallant Friend's permission, I will circulate in the OFFICIAL REPORT particulars of the amounts paid from Air Vote 8 (Civil Aviation) to meet the difference between the cash expenditure and the revenue of the British Overseas Airways Corporation for the financial years in question.

Following are the figures:





£


1940–41
…
…
1,835,146


1941–42
…
…
1,729,286


1942–43
…
…
1,962,573


1943–44
…
…
1,200,686

Sir Oliver Simmonds: asked the Secretary of State for Air whether the British Overseas Airways Corporation has rendered annual accounts, with statements, particulars and reports, as required by Sections 22 and 23 of the British Overseas Airways Act, 1939.

Captain Balfour: Yes, Sir. Statements of Accounts and Reports have been laid before the House for the years 1940–41, 1941–42 and 1942–43.

Sir Peter Bennett: asked the Secretary of State for Air how many aircraft, the property of the Crown, are now being operated by the British Overseas Airways Corporation.

Captain Balfour: The British Overseas Airways Corporation are at present operating 106 aircraft allotted to them by His Majesty's Government for purposes connected with the war.

Oral Answers to Questions — ROYAL AIR FORCE

Building Maintenance and Repairs (Direct Labour)

Mr. Mainwaring: asked the Secretary of State for Air why his Department has decided to abandon the policy of direct labour upon all R.A.F. stations, and handed over responsibility with regard to repairs and maintenance to private contractors; what number of men are at present employed on this work; to what firms contracts for the future have been allocated; and the stations affected throughout the country.

Captain Balfour: There has been no change of policy, and both direct labour and private contractors' labour are being employed on repair and maintenance at R.A.F. stations, in varying proportions. About 4,500 men are employed by the Air Ministry on building maintenance and repair at R.A.F. stations, and some 8,500 by contractors. Contracts have been le: to some 250 firms, covering all stations in this country with a few exceptions.

Mr. Mainwaring: Am I to understand that there is no change in policy with regard to the employment of men at the aerodromes West of the Severn? Is it now stated that there are no private contractors taking over what hitherto has been undertaken by the Ministry itself?

Captain Balfour: No, Sir, there has been no change of policy with regard to the employment of labour, both direct and indirect. We vary the proportion of men employed, direct and indirect, because we have a fixed allocation from the Ministry of Labour of men we are allowed to employ directly. Therefore, if we require certain specific trades of men, beyond our fixed allocation of labour, we let out a contract for maintenance.

Mr. Mainwaring: That is evasion. Is it not a fact that quite a large number of stations West of the Severn, which hitherto have been run directly by the Ministry, are now to be transferred to private undertakings?

Captain Balfour: No, Sir. I cannot tell the hon. Member about individual stations, but if he will let me have particulars of any individual stations, I will look into them. I want to make it clear that there is no change of policy with regard to direct and indirect labour, but we vary our proportions, in accordance with the allocation of labour made to us by the Ministry.

Sir H. Williams: Is it not the case that direct labour is more extravagant?

Education Officers

Mr. Kenneth Lindsay: asked the Secretary of State for Air what are the special and differentiating reasons which justify the R.A.F. granting commissions and uniforms to education officers and then employing them on a civilian basis and giving them a lower rate of pay than comparable officers, both in the R.A.F. and in the other Services; and wheher he will now make an inquiry into the matter.

Captain Balfour: Officers of the Royal Air Force Educational Services are appointed as civilian teachers, and paid as such. They are granted commissions in the Royal Air Force Volunteer Reserve, to facilitate their mobilisation should the need to mobilise them arise, but it is not considered justifiable to grant Service pay and allowances to those who, in fact, retain their civilian status. As regards the last part of the Question, my right hon. Friend has decided, with a view to surveying the problems that will arise during the transition from war to peace and in planning the education side of the peacetime Air Force, to appoint a Committee, regarding the membership of which he has been in consultation with my right hon. Friends the President of the Board of Education and the Secretary of State for Scotland, to inquire into the functions and organisation of the Service and into the duties and conditions of employment of education officers, and to recommend such changes, if any, as may be considered necessary or desirable.

Mr. Lindsay: Is my right hon. and gallant Friend aware that that answer will be received with much satisfaction?

Stations, Northern Ireland (Security Measures)

Dr. Little: asked the Secretary of State for Air whether he will take steps to

ensure that for the present no one shall be employed at, or have access to, an air base, either in use or under construction, within the bounds of Northern Ireland, except a person who is a native of and resides in, the United Kingdom.

Captain Balfour: No, Sir, and I am advised that the security safeguards for men so employed are already adequate.

Dr. Little: Is my right hon. and gallant Friend aware that there is grave dissatisfaction, particularly among the Americans, about the employment of outside people upon these air bases and aerodromes, especially those convenient to the Border? It has been expressed in the public Press.

Captain Balfour: No, Sir, I am not aware of any great dissatisfaction, and I cannot think that any dissatisfaction which was expressed would really be of much substance, unless the person expressing dissatisfaction had full knowledge of the security measures that we take.

Oral Answers to Questions — AIRCRAFT PRODUCTION

Messrs. Short Brothers

Sir George Schuster: asked the Minister of Aircraft Production whether he can give any figures for the output of aircraft from Short Brothers' factories in the 12 months since the change in management compared with the preceding 12 months.

The Minister of Aircraft Production (Sir Stafford Cripps): Yes, Sir. The output for the 12 months' period up to 3rst March last, during which the new management was in charge of the Short Bros group, showed an increase over the preceding 12 months of 69 per cent. overall in aircraft delivered, as well as a considerable volume of spares. The average number of workers employed during the last year was less than that in the preceding period.

Mr. Ellis Smith: Do these results not prove the correctness and the value of the action taken by the Minister at that time; and will he bear in mind that these results will give great satisfaction to the trade union movement, whose members have demanded that national interests and efficiency should be put before vested interests?

Power Jets, Limited

Dr. Morgan: asked the Minister of Aircraft Production whether he is aware that the proposed terms of the Government expropriation of the business of jet-propulsion engines and the terms exacted from the directors of Power Jets, Limited, are regarded by many of the smaller shareholders as unfair; and if he will reconsider this matter.

Sir S. Cripps: No, Sir. The terms were negotiated with the directors, and the shareholders will have the opportunity of recording their votes, for or against, at the meeting of shareholders which is shortly to be held.

Dr. Morgan: Is this policy being applied to a specific company and a specific invention, or will it be applied to other inventions of national importance, owned by the bigger combines?

Sir S. Cripps: This is not a policy; it is a specific case, in which certain premises and machinery have been provided by His Majesty's Government, who now wish to resume them on fair terms.

Dr. Morgan: Is it not unfair, say, to a small shareholder who is a prisoner in Japanese hands, that this question of his shareholding—a small one—should be decided in his absence?

Sir S. Cripps: That is a matter of company law.

Oral Answers to Questions — MINISTRY OF INFORMATION

Miss Freya Stark

Mr. Mander: asked the Minister of Information the purpose of the visit of Miss Freya Stark to America; and for what period and at what expense this visit has been arranged by his Department.

The Minister of Information (Mr. Brendan Bracken): Miss Freya Stark is a member of the Middle East staff of the Ministry of Information. She was granted leave of absence in order to visit America to deliver lectures, at the invitation of the Oriental Institute of Chicago. Her salary and her travelling expenses are being paid by the Ministry. As, since her arrival, she has been invited to speak by other public bodies, the date of her return is not yet decided.

Mr. Mander: Can my right hon. Friend give an assurance that there is no founda-

tion for the statement that she has gone out there to spread pro-Arab propaganda and to support the policy of the Wnite Paper?

Mr. Bracken: I can give such an assurance. Miss Stark is a distinguished scholar, who has been followed throughout the United States by a number of persons anxious to traduce her. I wish to put it on record that her visit has nothing to do with Arab propaganda.

Mr. Keeling: Would my right hon. Friend agree that Miss Stark is one of the great authorities on the Middle East and a most admirable person to represent British culture in America?

Mr. Bracken: indicated assent.

Mr. Bellenger: Is it not clear that the only persons allowed to go to America are those prepared to support the Government's policy?

HUNGARY (RADIO PROPAGANDA)

Mr. Bartlett: asked the Minister of Information whether he is aware that the Hungarian Government has been broadcasting statements to the effect that the Anglo-Saxons are dropping dolls, rattles and other toys filled with explosives; and what steps he is taking to counteract this propaganda which is detrimental to the war effort.

Mr. Bracken: When the Germans dropped their paratroops in Hungary and occupied all the principal Government departments they included some of Dr. Goebbels' merchants of lies. These representatives of the German propaganda Ministry seem to suffer from laziness of imagination. For they have resurrected the fly-blown story of explosives in dolls and rattles which was blared out early in the war by German radio stations, and long since laid aside.

Mr. Bartlett: Is the right hon. Gentleman aware that the Bulgarians are using the same old lie; and would he make it clear, in all our broadcasts in that part of the world, that people who do broadcast such lies, will have a very high priority on the list of war criminals?

Mr. Bracken: I do not think you can really give a high priority on the list of war criminals to liars—at any rate, professional liars trained by Dr. Goebbels.

Captain Plugge: Will the Minister satisfy himself that we have the means of covering Hungary on medium wave radio in order effectively to counter this propaganda?

Mr. Bracken: We certainly have the means. In fact, the radio facilities available to the Government at the moment are unexampled throughout the world.

Mr. Rhys Davies: Is not war itself a lie?

MUSEUM TELEPHONE EXCHANGE

Mr. Bartlett: asked the Postmaster-General when the Museum Exchange will be transferred from manual to automatic operation; and what steps he proposes to take in the meantime to render it less inefficient.

The Postmaster-General (Captain Crookshank): Conversion of the Museum Exchange to automatic working should be effected in the early Autumn of this year. Meantime, everything possible is being done to ensure satisfactory service, having regard to the age of the existing equipment and to the shortage of trained engineering and operating staff.

Mr. Bartlett: In order to prevent the spread of anger and despondency, would the Minister have placed in all telephone booths in London advice to the people ringing up the Museum Exchange that, if they do not at once get the ringing tone, they should not replace the receiver straight away, but wait, as this is the cause of all the trouble?

Captain Crookshank: It is a very old equipment there, but the staff is as good as it can be in the circumstances. The hon. Member's suggestion can be looked into, but I cannot promise to carry it out. It seems to me rather a sweeping one.

Mr. Bartlett: I was not criticising the staff. I realise that the staff and the machinery are old—[Interruption]—

Hon. Members: Withdraw.

Mr. Bartlett: I hasten to withdraw the statement, which was quite unintentional, and to say that the staff may be tired and the machinery is old, but that does not in any way affect the printing of slips of paper to be placed in telephone booths elsewhere.

Oral Answers to Questions — ROYAL NAVY

Discharged Men (Civilian Clothing)

Mr. Viant: asked the First Lord of the Admiralty if he is aware that, as recently as 7th April, at Chatham, a man on discharge from the Royal Marines was issued with the old type of blue suit, utility, a white collar to wear with his Service khaki shirt, a tie of an entirely different colour, a cloth cap and a pair of Service boots and was informed that he could obtain something better by accepting a voucher and paying 30s. at one of the establishments of a well-known tailor; and will he arrange for the improved conditions which have been inaugurated for the men discharged from the Army to apply to men discharged from the Navy.

The First Lord of the Admiralty (Mr. A. V. Alexander): The arrangements for the issue of civilian clothing to men discharged from the Royal Marines are identical with those in the Army, supplies for the Royal Marines being obtained from Army stocks. The items of clothing issued in the case referred to were of the standard types obtained from the Army clothing stores. As regards the second part of the Question, whatever improved conditions are adopted for the Army will be introduced for the Navy also.

Mr. Evelyn Walkden: Does the arrangement still exist that sailors on demobilisation are given a voucher which is only negotiable with Montague Burton, or has there been an alteration in recent weeks?

Mr. Alexander: That does not arise out of this Question, but I promised my hon. Friend that we would look into that matter, though I cannot give him the exact date when any change will take place.

Captain Plugge: May I ask my right hon. Friend if this man is a constituent of the hon. Member's or a constituent of mine?

Medical Examinations

Mr. Lewis: asked the First Lord of the Admiralty how it has happened that an ordinary seaman, whose name has been given to him, was passed as medically fit for service in the Navy, although he can only follow a sedentary occupation owing to dropped arches of


the instep; and why his Department refuse to rectify this blunder by agreeing to this man's discharge from the Navy.

Mr. Alexander: This man was found fit for service by a medical board set up under the National Service Acts. He has recently been examined and been found fit for sedentary duties on which he is employed. Men with foot defects are accepted for certain duties in the Navy, and I regret I cannot sanction his discharge from the Navy on medical grounds.

Mr. Lewis: Do I understand that the Minister has so lowered the standard of physical fitness required for the Royal Navy, that he will now accept men who can only do sedentary work?

Mr. Alexander: No, Sir. The actual length of service of this man is quite considerable, and he is doing most useful work on duties which I cannot specify.

Sea Cadet Corps.

Mr. Lipson: asked the First Lord of the Admiralty if, in view of the fact that some units of the Sea Cadet Corps are unable, owing to the limitation of their numbers, to accept all who wish to join, he will take steps to increase the establishment.

Mr. Alexander: If the hon. Member will send me details of the units he has in mind, and the extent of the unsatisfied demand, I will consider whether there is any possibility of increasing their strength.

Mr. Lipson: While thanking the right hon. Gentleman for his reply, may I ask whether it is a fact that the limit of establishment was fixed by the Treasury because, otherwise, it would make for larger grants?

Mr. Alexander: No, Sir. I think the matter has been one of consultation between the two Departments, but it also has reference to what vacancies are likely to occur in future in the Royal Navy and the Merchant Service.

Mr. Lindsay: Is the Minister not aware that if he wished, and the staff were available, he could quadruple the numbers in six months?

Mr. Alexander: There are quite a number of difficulties, and there are

reasons, other than the purely financial, which led us to fix the limit.

Mr. Lipson: asked the First Lord of the Admiralty if he will make grants to units of the Sea Cadet Corps to enable them to pay approved rent for their headquarters.

Mr. Alexander: Grants are already paid to units of the Sea Cadet Corps for purposes connected with the training of the Unit, which may include payment of rent for headquarters.

Mr. Lipson: Is the Minister aware that the grant made was quite inadequate to meet anything of the cost of headquarters; and is he prepared to reconsider the matter, in view of the fact that some units may have to close down because of the financial difficulties?

Mr. Alexander: No unit in that position has yet been brought to my notice, but, as I explained to the hon. Member for Kilmarnock (Mr. Lindsay) some time ago, this matter involves the capitation grant paid to them, which is administered by the Navy League, who make grants in special cases, with the aid also of their private subscriptions. No case has been brought to my notice of special difficulties.

Retired Officers (Emergency Service)

Commander Locker-Lampson: asked the First Lord of the Admiralty if a retired naval officer, who is recalled for service in war and retains his health, is entitled to expect to be retained on full pay for the duration of the emergency except for misconduct of a grave nature or other serious offence under the Naval Discipline Act.

Mr. Alexander: No, Sir, not necessarily. The continued employment of any such officer must depend upon his suitability for the appointments, if any, which are available.

WEST AFRICAN PRODUCE CONTROL BOARD

Mr. John Dugdale: asked the Secretary of State for the Colonies what crops are purchased by the West African Produce Control Board; what profits have been made on transactions in each crop by this board during the past three years; and how far these profits have been devoted towards the subsidy of prices paid to West African producers.

The Secretary of State for the Colonies (Colonel Oliver Stanley): The West African Produce Control Board now purchases cocoa, groundnuts, palm oil and kernels, copra, benniseed and ginger. Of these all but cocoa are sold to the Ministry of Food or other buyer at the average estimated cost, and no question of profit arises. As regards cocoa, a report on the Board's cocoa operations and the financial results is in course of preparation, and I propose to lay it before Parliament. As my hon. Friend will recollect, Parliament will be invited at the proper time to vote a sum equivalent to any profits realised on the transactions of the Board either for return to the cocoa producers or for expenditure on objects of benefit to them.

COLONIES (INTERNATIONAL LABOUR CONVENTIONS)

Mr. Edmund Harvey: asked the Secretary of State for the Colonies whether he will take steps to secure that, in all concessions for the working of minerals, provision shall be made to ensure the observance of the terms of the International Labour Conventions to which His Majesty's Government is a party.

Colonel Stanley: The practice in the Colonial Empire is to ensure observance of the terms of International Labour Conventions by the enactment of legislation in the Colonies to which they have been applied and not by the insertion of special conditions in individual contracts.

Mr. Harvey: Would not the insertion of the conditions in the contract be a valuable example to other nations to ensure the proper carrying out of the conditions?

Colonel Stanley: I cannot see that, if the matter is covered by legislation in the Colonies, there is any benefit at all in inserting similar provisions in individual contracts.

Dr. Morgan: Would not the insertion of the conditions in the individual contract help the individual worker to realise that something is being done to educate him for his position?

Colonel Stanley: What the hon. Member suggested was that it should be in the contract with the companies. I think the men would be much more likely to realise their rights by learning through legislation passed in the Colony.

PALESTINE (CITRUS INDUSTRY)

Mr. Astor: asked the Secretary of State for the Colonies whether he can give an estimate of the proportions of the citrus crops of Palestine which are, respectively, sold in the natural state, bottled, canned or processed and not used.

Colonel Stanley: The season, of course, has not yet ended, but, subject to this, it is probable that 50 per cent. of the total crop is used, and exported in its natural state, that 10 per cent. is used for citrus products, and that 40 per cent. is not used.

Mr. Astor: Is it not still very unsatisfactory that 40 per cent. of this valuable crop is allowed to go to waste, and, in consequence of the loss to many settlers involved, should not the suggestion of dehydration be reconsidered?

Colonel Stanley: We are trying to increase the process as much as possible, but there is a definite limit to the demand.

Mr. Astor: Is there not a demand for processed orange juice in this country, and will there not be an enormous demand for it in Europe as soon as it is liberated?

Colonel Stanley: I did explain, in answer to a previous Question, that there are difficulties there of what machinery you can get and what process you can employ in Palestine.

Oral Answers to Questions — JAMAICA

Medical Service

Mr. Fraser: asked the Secretary if State for the Colonies how many doctors have resigned from the Jamaican medical service during the last three years; and what were the reasons for their resignations.

Colonel Stanley: I am asking the Governor of Jamaica for this information and I will communicate with the hon. Member as soon as it is received.

Constitution

Mr. Riley: asked the Secretary of State for the Colonies whether the new Constitution for Jamaica has been approved by the Legislative Assembly; and whether the date for the elections under the new Constitution has yet been fixed.

Colonel Stanley: The Constitution has been accepted in principle, but in a change


of this magnitude there are numerous details which require careful consideration. The majority of these have been disposed of, but a few points of importance remain to be settled and these are under consideration locally. It is not yet possible to state when the elections will take place.

ANGLO-AMERICAN CARIBBEAN COMMISSION (CONFERENCE)

Mr. Fraser: asked the Secretary of State for the Colonies whether he will make a statement on the Barbados Conference, held under the auspices of the Anglo-American Caribbean Commission, in view of its importance as the first experiment in regional conferences containing representatives of the people of a number of different colonies.

Colonel Stanley: Yes, Sir. I am glad to inform the hon. Member that the Conference has been successful and was a promising beginning to this important experiment. Its recommendations will be considered by the Governments concerned. I have not yet had a full report on the recommendations of the Conference but printed copies of the report should be available shortly and I will then place a copy in the Library of the House.

Mr. Fraser: Can we take it that, if this departure in Colonial administration is the success that we hope it will be, the Colonial Office will extend the practice?

Colonel Stanley: I hope so.

SERVICE PAY AND ALLOWANCES

Mr. Bellenger: asked the Prime Minister what are the Government's proposals for the improvement of service pay and allowances.

Mr. Kendall: asked the Prime Minister if he is now in a position to make a statement on pay and allowances for members of His Majesty's Forces.

The Prime Minister: The Government have decided to make certain increases in the pay and allowances of members of the Forces and their families. These are set out in a White Paper which will be available in the Vote Office later in the day.

Mr. Pethick-Lawrence: May we take it that if, after reading the White Paper, which the House will no doubt do with

very great interest, the House would wish to have a day for discussion, the Government will be in a position to give the matter consideration?

The Prime Minister: I think the reading of the White Paper is the first step.

Later—

Mr. Bellenger: On a point of Order. In answering Question No. 45 to-day the Prime Minister stated that the Government's proposals regarding Service pay and allowances were embodied in a White Paper which would be available to hon. Members. I understand that this White Paper is now in the Vote Office but will not be available to Members until late in the day. Can you, Mr. Speaker, indicate whether there is any reason why the White Paper should not be released to Members forthwith?

Mr. Speaker: That has nothing to do with me. We only receive the Papers and issue them as instructed by the Government Departments, who usually say that they shall not be issued before a certain time. But, as I have said, the matter is outside my province.

Mr. Bellenger: Then may I ask the Patronage Secretary to state when this White Paper will be available, and why it should not be made available at once?

The Joint Parliamentary Secretary to the Treasury (Mr. James Stuart): I was not aware that the White Paper was in the Vote Office. My right hon. Friend the Prime Minister in his reply said it would be available later in the day. I do not know what time the release has been arranged for and, as I have said, I did not know the Paper had arrived.

Lieut-Commander Gurney Braithwaite: Will the Patronage Secretary use his good offices to secure the issue of this White Paper now, as its contents may have a bearing on the points which Members desire to raise in the Debate on the Budget Resolutions?

Mr. Stuart: I now understand that the White Paper has not yet been delivered, and I take it that the hour of release has been fixed in accordance with the usual publicity arrangements.

Mr. Bowles: Will the right hon. Gentleman give the House an assurance that Members will not be behind others in receiving this White Paper?

Mr. Stuart: I am sure it is the desire of the Government that this House should have the earliest possible information.

Mr. Riley: Can the right hon. Gentleman inform the House what is the hour for release?

Mr. Stuart: I have not that information.

Mr. John Dugdale: May we have an assurance that we shall see this White Paper before we see its contents in he Press?

DOMINION PRIME MINISTERS' MEETINGS

Major Lyons: asked the Prime Minister whether he is satisfied that at the forthcoming meetings of the Dominion Prime Ministers the Colonies will be adequately represented in all matters which may be raised affecting their present and future political status and economic well-being; who these representatives will be; and whether he will ensure that every care is taken to see that no decisions are implemented without prior submission to the appropriate colonial legislative assemblies for their consideration.

The Prime Minister: It is intended that the Secretary of State for the Colonies should be present when any question which may affect the Colonial Empire comes up for discussion, and also at other times. As regards the last part of the Question, I can assure my hon. and gallant Friend that while the interests of the Colonial Empire will be vigilantly watched I could not submit to such a sweeping inhibition as he proposes.

Major Lyons: Are we to understand that no representatives of the Colonies will be present in England at these meetings?

The Prime Minister: No, Sir, Sir Godfrey Huggins is at present representing Southern Rhodesia. That is not incompatible with representation of the Colonies but otherwise the Colonies are represented by the Secretary of State.

Sir Percy Harris: Can my right hon. Friend say whether a representative of the Indian Empire will attend this conference?

The Prime Minister: Not only the Secretary of State but Sir Firoz Khan

Noon and the Maharajah of Kashmir. They have both already attended our regular meetings.

Mr. Gallacher: Will there be a representative of the Congress?

NAVAL BASES (LEASES TO UNITED STATES)

Mr. Rhys Davies: asked the Prime Minister whether he is aware that the naval sub-committee of the House of Representatives, at Washington, recently decided to recommend that immediate steps be taken to acquire permanent possession of the bases in the Western Hemisphere leased to the U.S.A. by Great Britain; and if he will give an assurance that such a demand from the Government of that country will not be entertained by His Majesty's Government before Parliament is consulted.

Mr. Creech Jones: asked the Prime Minister if his attention has been drawn to the recommendation of a committee of the United State House of Representatives for the permanent possession of the bases leased from Britain; and whether he will give an assurance that the policy of His Majesty's Government remains unaffected in this matter.

The Prime Minister: I am aware that there has been a Press report to this effect. The House may rest assured that there have been no developments calling for a review by the Government or the House of the existing position in this matter, which remains unchanged.

Mr. Davies: Will the Prime Minister be good enough to answer the latter part of my Question? If a request of the kind mentioned comes from Washington officially, will the House of Commons be entitled to debate the subject before His Majesty's Government accede to such an arrangement; and will the right hon. Gentleman bear in mind his promise that he will not preside over the liquidation of the British Empire?

The Prime Minister: I welcome all the aid I can receive from so valiant a supporter.

Mr. G. Strauss: As the provisions of the Atlantic Charter provide that there should be no annexation without the con-


sent of the population, do not the same provisions apply to British Dominion territories as well?

The Prime Minister: There is not the slightest question of any cession of British territory—not the slightest.

PENICILLIN

Major Procter: asked the Minister of Supply whether, in view of the growing feeling that the manufacture of penicillin is tending to become a monopoly of the firms in the Therapeutic Research Association, he proposes, as in the case in Canada and the U.S.A. to permit its production by all firms who wish to manufacture.

The Minister of Supply (Sir Andrew Duncan): Any fears of monopoly in this matter are unfounded. Firms outside the organisation in question are making penicillin and the general policy is to encourage production on the widest practicable lines.

Oral Answers to Questions — FOOD SUPPLIES

Food Executive Officer (West Lothian)

Mr. Mathers: asked the Minister of Food whether he has considered the protest of the West Lothian food control committee regarding the method of filling the recent vacancy for a food executive officer in the county; and whether he has decided upon any change to give more consideration to the views and possible recommendations of voluntary food control committees when such vacancies arise.

The Minister of Food (Colonel Llewellin): Yes, Sir. Provision is already made for food control committees to submit nominations for food executive officers. I am sorry that for reasons of which I believe my hon. Friend is aware, the committee referred to was not asked whether it had any nomination in this case. I do not consider that any change is needed in the present procedure to which the attention of the divisional food officer concerned has been drawn.

Mr. Mathers: Have there been any cases in which food executive officers have been transferred from one part of the country to another; is the Minister satisfied that the best available appointment was, made in this case, and will he keep in mind Scottish views on this matter?

Colonel Llewellin: I am satisfied, having gone into it, that the best appointment was made in this case. The other point raises a rather wider question but it is certainly the normal practice to invite a recommendation at the same time from the local food committee.

Food Shops (Ex-Service Personnel)

Lieut.-Colonel Sir Ian Fraser: asked the Minister of Food if he will extend his Order permitting the re-opening by ex-Service men and women of their food shops, so that disabled ex-Service men and women, whose condition restricts opportunities for ordinary employment, but who are suitable for shopkeeping, may start shops even if they have not hitherto !been shopkeepers.

Colonel Llewellin: I do not wish disabled ex-Service men to put such savings as they may have into starting a shop which may be a failure and, so long as food rationing on its present scale continues, the number of openings for successful new shops are few. Within these limits I am consulting my colleagues to see what can be done for disabled ex-Service men in this direction.

Mr. Leslie: Will the Minister bear in mind what happened after the last war, when ex-Service men were cajoled into opening shops, for which they had no experience, and lost all their money?

Colonel Llewellin: That kind of situation was what my answer was intended to avoid.

Sir I. Fraser: Will the Minister not hide behind this fear that they may lose their gratuities, but give such of them as are competent and full of initiative the chance to become masters of their own small businesses? Will he use discretion in this matter, and not allow fear to deprive these men of their chance?

Colonel Llewellin: I am having the matter looked into thoroughly, and certainly I hope something can be done in proper cases.

Vegetable Prices

Mr. Evelyn Walkden: asked the Minister of Food if he is aware of the steep rise in the retail selling prices of spring greens and horticultural produce; that beetroots, sold at 9d. and 3d. prewar, are now sold at 9d. and 1s. and fresh


lettuce now sells at 3s. and 4s. per lb.; and if, in view of the enforced semi-vegetarian dietary, he will devise and apply a maximum price control order for all popular spring produce.

Colonel Llewellin: Maximum prices are already in operation for a large range of horticultural produce; for instance, 4½d. per lb. for spring greens and 3d. per lb. for beetroot. These prices are no higher than in 1942 and have been fixed as reasonable. I am afraid that it has been found impracticable to fix a maximum price for lettuces.

Mr. Walkden: Whilst I thank the right hon. Gentleman for the information, of which I was already aware, is he aware that lettuce was selling on the Friday of last week in the Vale of Evesham at 3s. a dozen from the grower and, on reaching the consumer, the same lettuces were 18s. a dozen in, say, London? Is he further aware that many similar commodities yet remain uncontrolled and salads are prohibitive for the average British housewife?

Colonel Llewellin: I would like to look into that particular case if my hon. Friend will send me particulars. It is not easy to fix a controlled price for lettuces. The lettuce is a difficult thing to measure.

Mr. Walkden: But the Minister could fix a price.

Green Tea

Sir Stanley Reed: asked the Minister of Food why the small remaining stocks of China tea in Britain, amounting to about 350 tons, have been repacked and shipped to Casablanca.

Colonel Llewellin: The tea to which my hon. Friend refers was green tea and not the black China tea, for which there is, normally, a demand in this country. There are still some small stocks of the latter, and much better tea in this country.

Sir S. Reed: Is the right hon. Gentleman aware that many delicate people drink only China tea? Is there a good reason why this limited supply should be exported to what is pre-eminently a coffee drinking community?

Colonel Llewellin: The tea position is this. My Ministry buys all the tea for all the United Nations, and we have to look

after our Allies in making our allocations, under a committee of the Combined Food Board. There was a demand for tea in North Africa, and we sent out the type which they prefer, and which most people in this country do not like.

COLONIAL TROOPS (CORPORAL PUNISHMENT)

Mr. Riley: asked the Secretary of State for the Colonies whether he will look into the existing regulations prescribing corporal punishment for native troops under colonial Governments so as to remove all discrimination in the forms of punishment for the same offences as between native and British troops.

Colonel Stanley: I have the whole question already under review in consultation with my right hon. Friend the Secretary of State for War.

Mr. Riley: Does the right hon. and gallant Gentleman admit that at present there is discrimination in the treatment of offences as between native and British troops? Is it not the declared policy of this country that no discrimination should apply?

Colonel Stanley: That Question has been addressed to and answered by my right hon. Friend the Secretary of State for War several times already.

MERCHANT NAVY (AIR MAIL)

Mr. Murray: asked the Parliamentary Secretary to the Ministry of War Transport if he is aware that men serving in the Merchant Navy have no air mail allowance when they are at sea and, on reaching port, may receive up to six letters, but if they are only in port for one week they have only one air-letter allowance; and if he will consider giving these men the same facilities as the men in the Forces, who are allowed five air-letters a month.

The Parliamentary Secretary to the Ministry of War Transport (Mr. Noel-Baker): When a merchant ship arrives at a port in any area from which the air-letter service is available, each member of the crew immediately receives a form. While the ship remains in port, he receives further forms at the same rate as members of His Majesty's Forces, that is to


say, at the rate of six forms in four weeks. I have received no complaints that this arrangement is unfair to the Merchant Navy, but I have given instructions that the question shall be considered again.

Mr. Murray: Is the hon. Gentleman aware that I have already been informed that when these men come into port, they are only allowed one form, even if they are away five or six weeks?

Mr. Noel-Baker: Yes, Sir, I am aware that time at sea is not counted for the issue of forms, and that is the point which I am having re-examined.

Mr. Murray: Cannot these men have other forms issued to them, so that they are put on the same footing as men in the Forces?

Mr. Noel-Baker: That is what I am looking into now.

Mr. Murray: asked the Parliamentary Secretary to the Ministry of War Transport if he is aware that men serving in the Merchant Navy left this country in June, 1943, and did not receive any mail until December, 1943, and some not until February, 1944; and if he will take steps to remove the anxiety of these men, their wives and families, by having their letters despatched as early as possible, so that they will receive them in reasonable time.

Mr. Noel-Baker: As I said last week in answer to my hon. and gallant Friend the Member for Lewes (Rear-Admiral Beamish), I have made constant endeavours, in consultation with my right hon. and gallant Friend, the Postmaster-General, to improve the mail services to members of the Merchant Navy. If my hon. Friend will give me details of any specific complaint which he may have received, I shall be happy to look into it.

Mr. Murray: I should be very glad to do so, but is the hon. Gentleman aware that I have cases now where men have received letters, posted in June, only in December of the same year, and some not until February of the next year?

Mr. Noel-Baker: Yes, Sir. I am sure such cases occur because ships have to be moved about in accordance with operational requirements, and the letters follow the ships. We do the best we can but it is very difficult.

Mr. Murray: Is the hon. Gentleman aware that the men concerned knew where they were going before they went away, and still they did not receive any letters from June to December?

Mr. Noel-Baker: It does not usually happen, if a ship follows its allotted programme, that the letters do not arrive fairly quickly.

Lieut.-Commander Braithwaite: In view of all the grave handicaps, is it not a fact that all mails have got through far better than we could have hoped?

SWEDISH BALL-BEARINGS (EXPORT TO GERMANY)

Mr. Molson: (by Private Notice) asked the Parliamentary Secretary to the Ministry of Economic Warfare, whether he has any statement to make regarding the export of Swedish ball-bearings to Axis Europe.

Mr. G. Strauss: On a point of Order, Mr. Speaker. As I have a Question down to the Secretary of State for Foreign Affairs asking what has been the result of our representations to Sweden, among other countries, about the export of vital war materials to Germany, how is it in Order that a Private Notice Question should be asked on the same subject?

Mr. Speaker: I understood the Foreign Secretary to say that the reply to that Question would be given in the answer to the Private Notice Question.

Mr. Strauss: He said that a statement would be made about it, but my point is: how can it be in Order for a Private Notice Question to be put on the same subject as a Question on the Paper on the same day?

Mr. Speaker: That escaped my notice but I think the hon. Member's Question was a combined one, which referred to other countries as well as Sweden.

The Parliamentary Secretary to the Ministry of Economic Warfare (Mr. Dingle Foot): Yes, Sir. As reported in the Press, the United States Minister in Stockholm on 13th April last presented a Note to the Swedish Foreign Minister, calling attention to the great value to Germany of supplies of Swedish ball and roller bearings, and requesting the Swedish


Government to prohibit such exports. He was accompanied by His Majesty's Minister, who fully associated himself with the terms of the American Note. I understand that the Soviet Government has since done the same.
I greatly regret that the Swedish Government, whose reply was handed to the two Ministers on Saturday last, have not seen their way to meet our request. It is quite true, as the reply states, that the present level of such exports is not inconsistent with the terms of the revised War Trade Agreement signed in London last year. It does not follow, however, as has been suggested in certain quarters, that we have therefore in any way approved these exports to the enemy or that we are debarred from asking for further reductions. I wish to make it clear that His Majesty's Government, whose views on this subject are shared by the United States Government, cannot regard this as a satisfactory reply. This is a matter to which we attach very great importance. Since August last, the destruction in Axis Europe of plants producing ball and roller bearings has been one of the principal objectives of the bomber offensive. The Allied Air Forces, and particularly the United States Strategic Air Forces, have made, at considerable cost, no less than twenty major attacks on Schweinfurt, Steyr, Erkner, Turin and other centres of the enemy's ball-bearing production. During the same period there have been 35 heavy night attacks by Bomber Command on cities and towns which are importent centres of ball-bearing manufacture. Evidence showing the success of these operations has reached us from many sources and there can be little doubt that ball-bearing production not only in Germany but in satellite and occupied countries as well has been very seriously reduced. This in turn affects the output of aircraft, tanks and vehicles of all kinds. Therefore we regard the Swedish supplies even at their present reduced level as relatively more important to the enemy than ever before.
His Majesty's Government and the United States Government are now considering the Swedish reply, but they certainly do not regard this question as closed.

Sir A. Southby: May I ask the Parliamentary Secretary to the Ministry of

Economic Warfare whether, after the Government have considered the Swedish reply, he will make another statement to the House on the subject, bearing in mind that Sweden appears to be running true to her form of the last war?

NEW MEMBER SWORN

Harold Neal, Esq., for the County of Derby (Clay Cross Division).

BILL PRESENTED

AGRICULTURE (MISCELLANEOUS PROVISIONS) BILL,

"to provide for the establishment of a National Agricultural Advisory Service, and for increasing the resources of the Agricultural Mortgage Corporation and the Scottish Agricultural Securities Corporation, and otherwise to amend the law relating to agriculture and matters connected therewith"; presented by Mr. R. S. Hudson, supported by Mr. T. Johnston, Mr. Assheton, Mr. Torn Williams and Mr. Allan Chapman; to be read a Second time To-morrow, and to be printed. [Bill 19.]

WAYS AND MEANS

Considered in Committee [Progress, 25th April]

[Mr. CHARLES WILLIAMS in the Chair]

AMENDMENT OF LAW

Question again proposed,
That it is expedient to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance."—[Sir J. Anderson.]

Mr. Pethick-Lawrence: We were indebted to the Chancellor of the Exchequer yesterday for a most interesting statement, delivered with his accustomed great knowledge and authority. The feature of that speech which most impressed me was his concentration on the development of the country after the European war has concluded. Of course, the right hon. Gentleman was careful to make no phophecy as to the manner and the date of the end; of course, he warned us against the slightest relaxation of the war effort; of course, he made no appreciable reduction in the estimate of the required Votes of Credit. In common, I imagine, with every other Member of the Committee I should have been most critical of his speech if he had followed any other approach to the problem before him. But the fact remains that the Chancellor did devote a considerable part of his speech to the postwar situation and, further, that the only substantial changes in his Budget were directed to helping post-war recovery. In other words, although he told us at the end that it was a case of "the mixture as before," he contrived to slip in a prescription for a little bottle of tonic intended for our convalescence, and hinted that when he paid us his next professional visit, a year hence, he might prescribe for us a different medicine altogether.
Before coming to the concrete Budgetary proposals, there are two other points on which I would like to touch. In the first place, the Chancellor of the Exchequer took note of the rise in wages, salaries and other costs, and he told us that in consequence, although not abandoning the principle of holding down the cost of living, he proposed to apply it a little less rigidly and to allow the index

to rise a few points. I question the wisdom of that course and, in particular, do I question the ground on which the right hon. Gentleman considers it desirable. In the last war wages chased prices, with an inflationary result, and it would be thoroughly bad if, in this war, the cost of living were to chase wages. To be fair to the Chancellor of the Exchequer, I am not suggesting that he indicated that that was his intention, but I think he did give some indication that that line of thought was influencing him in his action. There might be some justification for this course if personal consumption, in terms of fixed prices, was actually rising, but from the White Paper that the Chancellor has himself issued, that is demonstrated not to be true. On page 8 of the "Analysis of the Sources of War Finance," in table C.2, line 3, it will be found that the expenditure of the public on consumption, in terms of fixed prices, has been steadily falling throughout the whole period of the war, and during the last three years, to which the Chancellor himself made reference, it has been represented by the figures 88, 82, 81 and 79 respectively. Therefore there is no suggestion, from the figures in this White Paper, that the public have been pressing increasingly upon the provision of commodities.
The reason is, of course, that while the cost of living has been stationary in the last three years, retail prices have substantially risen. The figures given in the White Paper show that they have risen from 118 in 1940, to no less than 141 during last year, and this rise is reflected in the larger cost of living which the public have to face in dealing with their expenditure. In other words, the fact that goods are rationed, that the definite necessaries of life included in the cost-of-living index have remained stationary, has not meant that a household, in order to meet its daily expenditure, is not compelled to pay more to-day than it paid three years ago. That is the common experience of the bulk of the people. Therefore, I say, and I say it with the very strongest desire to prevent inflation, that I think the course the Chancellor has announced will not help to prevent inflation but rather the reverse. If wages have gone up in response to the increase in the full cost that people have to bear, if the Chancellor, in consequence of that, desires to put up the cost of living, then I think we shall get an infla-


tionary spiral in this war similar to the one we had in the last war when, as I have said, wages were perpetually chasing the cost of living.
As regards those who are not wage-earners or soldiers but who have fixed incomes, many of them small fixed incomes, I venture to suggest that if the Chancellor allows the cost-of-living index to rise, he is taking a step which the Government, up to now, have most scrupulously avoided. We have only recently had before us the Pensions (Increase) Bill and we have not yet got through all its stages. The Chancellor based his proposals in that Measure on the supposition that the cost of living showed a certain increase over pre-war years. In so far as he ceases to hold the increase at the present figure, then his proposals lose part of their meaning and might impel some of us to demand a greater change than we have accepted in the provisions of that Bill.
I do not want to exaggerate what the Chancellor may do. As I understand it, both from his speech here yesterday and his speech in the evening to which I listened with great interest, he does not propose to make any very wide change. I do not consider a rise of one or two points a matter of very great significance. It is the principle which I regard as a matter of significance, and if the Chancellor comes to us and says that owing to a rise in wages he feels it only right and proper to raise the cost of living, and bases his action on that principle, then I shall venture to disagree with him and to ask him to think again, because I do honestly believe that so far from having a deflationary effect, which is what he would like, it might well have an inflationary effect, which he would regret. If he persists in his action, I hope he will at any rate keep it within the very narrowest limits, so that it will not have the consequences which I fear.
The other matter to which he referred was the importance of the export trade after the conclusion of the war. I am not quoting his precise words, but I do not think I am misrepresenting him when I say that he said this would be dependent on the efficiency of industry after the war, and the skill and energy of the workers. Of course that is quite true, and I do not dissent from it in the very least; but I would remind him and

the Committee that after the last war, there was no reason to doubt the efficiency of industry or the energy and the reliability of the workers. But a third factor intervened which was much more important, namely the action of the Bank of England and of the Government, supported by this House, in raising the exchange value of the pound above its proper level and, in the rising cost of money so that industry and labour were forced into the slump and unemployment and all the difficult conditions of the inter-war years. I am hoping, and I believe with justifiable confidence, that the lesson of that disastrous state of affairs has been learned and that the mistakes then made will not be repeated; but in view of the remarks of the Chancellor of the Exchequer, I have thought it not inappropriate to refer to that in what I have said to-day.
On this I will say one thing more. We have had presented to us, in the course of the last few days, a White Paper relating to currency and exchange. I am sure it is the intention of the Chancellor of the Exchequer, from the promises that he has already given, that we shall have an adequate opportunity of discussing the whole of that plan before the Government commit themselves to it in any way. That opportunity does not arise to-day, but will be for a more appropriate occasion, when we can go into the details and discuss them fully on their merits. I should be most unwilling, and it would be improper or my part, to discuss them now. I should like, however, to say a few words, not on the details but on the principles which should guide us, whatever plan may be accepted. First and foremast, in the post-war recovery, I place the prosperity, not of this country alone but of all countries of the world. Their prosperity can only be achieved if there is, in every progressive country, a progressive expanding economy. I think it is the duty of this country to do everything in its power to contribute to that world-wide advance, and that includes, of course, cooperation with other countries as far as we can go in order to achieve it. It will involve, at any rate up to a certain point, keeping step with other countries in their financial policy. But when I say that I feel it imperative to remark that it is essential that our own prosperity should be preserved.
The prosperity of our country after the war will depend upon certain things. It will depend upon cheap money, and it will depend upon the control of the price level so that it remains substantially constant over a period of years. One of the necessary factors in that is that we shall not be so tied up with other countries, that, if their price level fluctuates up or down, we shall necessarily be bound to allow our own internal price level to follow that undesirable fluctuation. It follows from that, that we must start by having a reasonable rate of exchange, and that our prices shall be, to some extent, insulated from being dragged along with the prices of other countries. If I may change the metaphor it may be necessary to have something corresponding to a half-tide lock, so that though we may like to follow the rest of the world within certain limits, when a limit has been reached we shall be free to keep our own head of water at the necessary level.
Finally, on this point, I should like to say that I am a great believer in bulk purchase. It has been a very successful operation during the war, and though I am quite prepared to admit that circumstances will be different after the war, I feel that bulk purchases, and to some extent bulk sales, may be a necessary feature of post-war economy. That will bring in a great many questions about the attitude of other countries, who may take exception to possible differences between the prices at which we sell goods elsewhere and those at which they are sold at home. It is a matter we shall have to consider carefully. To sum up, it is most important that we should act in a friendly and co-operative way with the other great countries—in fact with all the countries of the world—and particularly, of course, with our great neighbour with whom, we have worked so amicably during the war, the United States of America and also with our great ally the Soviet Union. It will be most unfortunate if we do anything which will estrange their sympathies with us in the financial and commercial world. But, at the same time, we must take no action, in response to their invitations, which will put us into a strait-jacket and prevent us from developing our own prosperity. I will not pursue that subject farther than that to-day. The application of those principles to the precise proposals

in the White Paper will be properly reserved to the Debate when it comes.
Turning to the Budget proper, I should like, first, to add my thanks to those of the Chancellor of the Exchequer to the Government and people of Canada for repeating the generous economic help which they gave us last year. In that connection, I would only remind Members of the Committee, and others outside, that while the figures of the current Budget are comparable with those of last year, when the same method of helping us from Canada prevailed, they differ from those of the previous year when the Canadian contribution was given in a different form. As to the rest of the Budget, I think the decisions taken by the Chancellor to make no major change in taxation is a sound one. In fact, I may tell him that a few days before his Budget was announced, some Members of this House asked me what I thought was going to take place. I said that if I were the Chancellor of the Exchequer I should make no changes whatever, which only proves that great minds think alike. Such minor changes as he has made, I also approve of. I think that his proposal with regard to authors—which I have no doubt he carefully considered—although a small measure of relief, does straighten out a difficulty which existed in the past. I would only add that authors would be still more obliged to the Chancellor if he would help them to earn an income by getting his right hon. Friend, the Minister of Supply, to allow to publishers a slightly larger quota of paper. I understand the idea that the paper which publishers are at present using for the printing of their books comes from abroad is incorrect. I am informed, although I have not checked my information, that the paper they use is from home sources and, if that is correct—

The Deputy-Chairman (Mr. Charles Williams): I am very reluctant to intervene in this speech, but I think it would be a little difficult for me, if we pursued at any length the matter of supply of raw materials for any industry, whether authorship or otherwise.

Mr. Pethick-Lawrence: I quite accept your Ruling, Mr. Williams. I was not proposing to go into the matter at any length, and am willing to leave it where it is, having expressed the point in connection


with the proposal which the Chancellor actually laid before us, and which I support.
I now come to the relief which is being given in the current Budget as to E.P.T., and the promises for the future in the matter of the development of industry, agriculture and research. In regard to those, I do not propose to make any detailed observations, but will confine myself to this general observation. It does not, of course, escape the attention of myself, or of my hon. Friends who sit with me on these benches, that these proposals are a distinct benefit to private enterprise in this country, but we recognise the overriding necessity of restoring British industry after the war, and that, as soon as possible.

Sir Granville Gibson: And assisting employment.

Mr. Pethick-Lawrence: Certainly. The reasons for restoring industry are, first, in order that the trade and finance of the country may improve and, equally, that unemployment may be prevented in the future. When I say industry I also include agriculture. That is the overriding consideration and nothing can be more important than that there should be capital available in the country and, still further, that research should be pursued by every means in which the inventive genius of the people of this country can be utilised. Therefore, for my own part—and I think I am entitled, in this matter, to speak, at any rate, for the great majority, if not for the whole, of the Party behind me—I not only acquiesce in but welcome the proposals which the Chancellor of the Exchequer laid before us yesterday. I welcome them most heartily, believing them to be of great advantage to the development of the country in the future. But I do so on one condition. That is that when the time comes, as it will come later, for the Chancellor to consider the other factor in industry, the human factor, when he comes to consider the desirability of so educating the worker that he may reach his highest skill, and of so protecting his health that he may be at his maximum strength and capacity, of so safeguarding him from unemployment and from the deteriorating effects of unemployment—that when the right hon. Gentleman comes to those questions, which are

broadly those envisaged in the Beveridge Report, he will take an equally generous view of the situation. I also hope that Members sitting on the benches opposite will take the same view on that as I take on this matter, namely, that they are prepared not only to acquiesce in them, but to welcome them.
I have no desire to keep the Committee at any great length and I have virtually finished what I have to say. I will only add that the Chancellor of the Exchequer was careful yesterday to point out that he was not merely the custodian of the purse of the State, but was concerned intimately with all the finances of the country as a whole. I was very glad to hear him make that statement. I have made a number of speeches on finance in different parts of the country during the Last 25 years and I think there has rarely been an occasion on which I have not emphasised that essential point, because the State, after all, is only that part of the country as a whole which it has been decided to bring under the heading of corporate action. Behind the State lies the country, and the State can only be really prosperous if the country is prosperous. Therefore, I am very glad that the Chancellor emphasised, that he took the whole finance of the country for his province, and did not confine his attention to that part of it which is the Budget of the State. May I, in congratulating him on that statement, also congratulate him and his predecessor on this White Paper, the "Analysis of the Sources of War Finances," from which I have already quoted.
We owe a great debt to the two Chancellors of the Exchequer and, of course, we all know that we owe a great debt to Lord Keynes, the man who originated the idea. I find a mine of information in this current Paper, which I have only had time to read cursorily, since it was not available for our perusal until yesterday. Though it would be an exaggeration to describe it as a breezy little manual, yet, I think, it is even better this year than last, and will be of great benefit to us, to the people of this country and also to the peoples of other countries who take the trouble to look into it. I thoroughly support the Chancellor in taking this wide view of his responsibilities, and I hold that only in so far as he does that, and recognises the wide field over which


his mind and those of his officials should properly roam, will he reach the full stature of the exalted office to which he has been called.

Sir John Wardlaw-Milne: It has been my privilege on previous occasions, in connection with Budget Debates, to follow my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) and I have also had the experience of sometimes seriously differing from him in the views he has put forward. It is, therefore, with the greater pleasure that I can say to-day how thoroughly I agree with the bulk of the remarks he has just offered to the Committee, but, perhaps, he will allow me, as an old friend, to say that, as he was speaking and as my memory went back to his speeches—at the time when he occupied the distinguished position in the Treasury—in support of Lord Snowden—then Mr. Snowden—I wondered if the halo which, in fact, I have seen growing round his head for the last few years, was not now complete and that he was really acquiring a white sheet as well. I say this because I find my right hon. Friend putting forward views regarding the expansion of trade and avoiding any kind of currency contraction, and proposing a number of measures which I have heard him deal with rather differently in days gone by. However, none of us should be held responsible, as I think the Prime Minister has said, for our speeches in the past, and I welcome the fact that my right hon. Friend has become such a convinced supporter of the necessity for expansion and the avoiding of any possible repetition of the mistakes that occurred after the last war.

Mr. Pethick-Lawrence: I should be much obliged if my hon. Friend would send me some of those speeches to which he has referred, because I have no recollection of them. If he would send them to me, I should be very interested to see what I did say, because I do not think I said anything different in them from what I have said to-day.

Sir J. Wardlaw-Milne: In any case the right hon. Gentleman has every excuse because he was then in an official position and speaking for his Government while he is now completely free.
It is customary to say something complimentary about every Budget speech, but I think all will agree that the speech we heard yesterday was an extremely lucid exposition of our financial situation and we are genuinely indebted to the Chancellor of the Exchequer for a very explicit, and at the same time very clear, statement of how we stand. He told us that we were meeting the expenditure of the past year to the extent of something like 50 per cent. by means of taxation. I think it might be said that his speech was in two phases—gloomy and gay. So far as it was gloomy I think he was right to be gloomy and perhaps the Committee will not think it unwise if I say a further word on that aspect of our financial affairs.
It is true that we are raising 50 per cent. or thereabout of our expenditure by taxation, but it is equally true that we have added something like £2,800,000,000 to the National Debt in this last year, which is something like £60 per head of the population. Our National Debt is now something like £20,000,000,000, and this means that every man, woman and child here is carrying a debt of about £430. Some people will say "That does not worry me. I have nothing but my wages or my salary. I do not have to pay any of that." Probably pay-as-you-earn taxation will have caused people to adopt rather a different attitude to that question of personal contribution to taxation. At any rate, I hope the figures my right hon. Friend gave of borrowed money will have one good effect. I hope they will stop the silly cry that goes round the country from time to time, and for which perhaps certain Members of Parliament are not without some share of guilt, that if we can afford to pay £14,000,000 or £15,000,000 a day to run the war we can easily afford this or that or the next thing. The sooner that sort of idea is sat upon so thoroughly that it cannot be repeated, the better. We are not affording £15,000,000 a day. We are merely running into debt. It may be a very fine achievement to raise 50 per cent. by taxation, but do not let us ignore the fact that at the same time we are adding enormously to our debts and pledging the future to a very large extent.

Mr. Woodburn: I take it that the hon. Gentleman is not meaning to imply that


we are running into debt to the extent of £14,000,000 a day. It is only a proportion of that which is debt. In addition to the money that is being spent on the war, I think he will agree that the people have seen a great national effort for war that they have never seen for peace and they might justifiably take the view that it ought to be done for peace.

Sir J. Wardlaw-Milne: I am not in disagreement with anything the hon. Member said but I did not make the statement that he has suggested. I stated that the argument that because you have to spend enormous sums on the conduct of the war you can spend enormous sums on any kind of project in peace-time is erroneous.

Mr. Boothby (Aberdeen and Kincardine, Eastern): Surely my hon. Friend draws a distinction between external and internal debt.

Sir J. Wardlaw-Milne: I hope to come to that aspect of the matter in time. I think my hon. Friend knows quite well that I agree with him.
The right hon. Gentleman the Member for East Edinburgh also referred to the Chancellor's statement regarding allowing the price level to rise still further. I appreciate that allowing it to rise four or five points will affect a good many people and particularly those on fixed incomes who can least bear it, but I gather that the right hon. Gentleman the Member for East Edinburgh thought the Government were wrong in allowing this increase to take place. I do not hold that view. I am afraid you cannot allow earnings to steadily increase and at the same time, by taxation, keep the price level down. That would be dangerous. If you carry it too far, you get into the inflationary spiral whether you like it or not. I agree as to the disadvantages and hardships, but the time has come when it is essential to allow the price level to rise to some extent unless earnings are fully controlled. That is one of the few points the right hon. Gentleman the Member for East Edinburgh made with which I do not entirely agree. I think it will be a very good thing if the country takes a warning from what the Chancellor has said and realises that if wages and salaries are allowed to go up without control prices are almost bound to follow and indeed might soon take first place in the race.
I come now to the point that my hon. Friend the Member for East Aberdeen (Mr. Boothby) raised. It is one of the good points about our financial situation that our debt is almost entirely internal. The process of increasing taxation and particularly heavy taxation on the larger incomes has resulted in nothing more or less than the evening out of wealth. The process has been going on for a long time. It has been accelerated naturally in the period of the war at a very rapid rate and the result is that now there are no so-called rich, I suppose we are all poor. You can call it evening up or evening down according to which way you look at it. From the nation's point of view, there is a good deal to be said for the process. The result may well be beneficial. It may make the provision of new capital in the days of peace and the operation of enterprise and initiative that we want to see perhaps more difficult but apart from that there is no doubt that, economically as well as socially, the evening of incomes is probably of benefit to the country in increasing consuming power.
Our first contribution as I see it to the establishment of economic security and peace after the war is to try to pat our own house in order. I hope we shall have an opportunity of discussing the international plans which have been made for fixed exchanges between the nations which are very essential. But I agree that this is probably not a very suitable time to discuss these matters. I have read them all carefully and as far as I may venture any opinion I am more attracted by that of Lord Keynes than the others. But they are all groping for the same thing—for the solution of a difficult problem—and that is how we are to facilitate trade between the nations after the war and how we are to secure that a system of financed barter—for that is what it amounts to—can be carried on without disturbance and with advantage to the different countries of the world. But while it is our business to do our utmost to get an international system working, our principal contribution in the early stages after the war is to put our own affairs here in order. If we are to get prosperity here we must have prosperous industry based on increased consumption from an expanded consuming power within our


own country. It means we must have the most up to date machinery, the best technical education and workmanship, the scrapping of obsolete plant and thus ensure that the margin that must be exported can be offered on the most competitive basis possible.
In the last year in which the figures were published before the war we had an adverse balance of trade to the extent of £400,000,000, and our adverse balances had been growing for some years previously. I do not know what our position will be after the war but it is clear that we shall have to import a large amount of food. Our agriculturists have raised production from 37 per cent. of our pre-war food consumption to 72 per cent. of our war-time requirements and we owe them a wonderful debt of gratitude for their efforts but we shall still have to import food after the war. The difference between the value of our total imports against our exports in 1937 was met to the extent of £220,000,000 by interest from investments abroad and to the extent of £100,000,000 by shipping and other earnings. The first of these sources of revenue has gone and the second must be a lower figure—possibly much lower—and therefore we are going to be faced with a gap whatever its total may be which we cannot fill by means of accumulated balances or legacies from our predecessors. We have to buy what we require in the way of raw materials and food by the export of our products, and these products have to be produced in competition with the rest of the world, much of it working probably on a lower standard of living. No one is going to take any token money or anything else in exchange for the imports that we want but only goods which we must produce in competition with other people. The alternative of cutting down imports would be difficult indeed. We cannot cut raw material imports. We want more. They are the basis of the prosperity of our industry and of our exports. Therefore if we are to secure purchasers abroad for our products, it means that we must have the most efficient industry, the best possible standard of living and conditions of wages, the best housing, the best technical education and so on.
All these things can only come from a prosperous industry. Indeed, if we have

a prosperous industry they will come of themselves. Everybody wants social amenities and the suggestions that are put forward in proposals like the Beveridge Report, but it is only by a prosperous industry that we can get them without any difficulty. There is no doubt in that connection that the statement of my right hon. Friend the Chancellor is very helpful. Industrialists undoubtedly in the last year, and in the last few months especially, have been very worried about the position because they have not known where they would stand after the war. They have a right to know to the extent that it is possible to let them know. They are as anxious as the State must be to put their house in order so as to secure as soon as the men come back the greatest amount of employment and prosperity. I agree with what the right hon. Gentleman the Member for East Edinburgh said, that the Chancellor has taken a wide view not only of the finances of the last year but of the outlook for the country in the future. Nobody could complain that the whole canvas has not been filled in at this stage. It would he unreasonable to expect it, but the measures my right hon. Friend has indicated show that he realises the necessity of giving confidence to industry as to how it will stand in the days to come.
There are two matters, however, about which I thought my right hon. Friend was a little hesitant, although I cannot say that I expected anything else in the circumstances of to-day. The position of the Excess Profits Tax after the war must concern every industrialist. He wants to know as soon as possible when he will be able to have a chance to earn something for himself as a recompense for extra effort. He has also to consider the extent to which the fact that he has not been able to earn any surplus profits in his industry during the past few years has prevented him putting back into the business those reserves which are needed for new machinery and new outfits which the post-war industrial set-up will certainly demand.

Mr. Lipson: Is my hon. Friend correct in saying that manufacturers cannot make any profits?

Sir J. Wardlaw-Milne: I think my hon. Friend knows the conditions of the Excess Profits Tax as well as I do. I also cannot


quite understand my right hon. Friend's diffidence on the subject of motor car taxation. He spoke about being willing to have the whole matter put to him before coming to a decision. I do not blame him for not knowing this subject thoroughly. I do not pretend to know it, for I am not interested in the industry and am not an expert, but I am fairly certain, as a Member of Parliament, that the matter has been put before Chancellors of the Exchequer for at least the last ten years. Though it may not be in the exact form my right hon Friend expects to see it now, he rather gave me the impression that the Treasury were hearing of this proposal for the first time. Motor car manufacturers and the trade have been pressing it for years, and if there is anything to be done I hope that my right hon. Friend, if he finds that the arguments are sound, will be able to put a new basis of taxation into force without delay so that this very large industry will be able to play its full part in trade expansion after the war.
Again, the State is refunding to the owners of ships which have been lost sums of money to compensate them for their losses, and that is perfectly right and proper. I do not suggest that it is the business of the State to bring undue pressure on shipowners as to how they should use their money, because they must be the best judges as to when to build ships to replace those that are lost. I do not think, however, that it would be harmful if my right hon. Friend and the Government would make it clear to shipowners that it was hoped—let us put it no higher than that—that the money would be used for the replacement of ships and that as soon as is reasonably possible. We want to get the British Mercantile Marine as active and energetic as possible after the war. A great many ships will be required for special trades, and without applying undue pressure I think the Government might well say they hope that that will be the course followed.
The efforts of future Governments must be towards expansion and not contraction of credit. We must not repeat the mistakes we made after the last war. The Government will have to encourage every kind of new enterprise, new ideas and new initiative by the individual. That means that they must enlarge as time goes on the excellent indications which the Chan-

cellor gave yesterday of their desire to help industry after the war and remove controls as soon as they can. We will have to provide the best possible technical skill, equipment and education. We have not had them in the past, and we have been behind others. That will require a good deal of State assistance. We want to maintain and improve our own standards of life, and for economic as well as for humanitarian reasons, we have to do all we can to improve the standards of the peoples of other nations and thus increase their prosperity and the consuming power of the world. On a prosperous industry we hope to have a firm foundation upon which, after the horrors and privations of these terrible years, we may help to build that structure of world peace, freedom and human progress which I believe lies ahead.

Mr. Gallacher: The hon. Member made references to industry desiring to know what will happen after the war. Is he speaking for the employers or for the workpeople, because the work-people have an entirely different idea as to what the conditions should be after the war than the employers have?

Sir J. Wardlaw-Milne: My hon. Friend may take it that when I am speaking of industry I speak from both the employers' and the employees' points of view. Contrary to my hon. Friend's view, I would tell him that, as far as I know industry, the views of the people in industry, both employers and employees, are on exactly the same lines. If I may do so without offence, I would apply to my hon. Friend a little couplet which is going round the country:
The King of Korea is gay and harmonious; He has one idea, and that is erroneous.

Sir George Schuster: I wish to start, like everybody else, by expressing my great appreciation of the speech we heard yesterday from my right hon. Friend. If I am brief in my congratulations, I hope that my right hon. Friend will not take it as a measure of my appreciation; it is due to the fact that I have to catch a train. I regard his statement as the most constructive, in a realistic sense, to which I have listened since I have been a Member of the House of Commons. There was not a phrase in it which had not, obviously, been the subject of close thought, and not a phrase that owed its force to mere rhetoric.
I want to deal with the four main topics that seem to me to stand out from the picture as it has been presented to us—first, the role of the Treasury; second, the immediate proposals; third, the shape of things to come; and fourth, the country's need. As regards the role of the Treasury, I only want to say this. I believe that my right hon. Friend has a chance to become one of the most memorable Chancellors. He has taken over at a period of what I might describe as a climacteric change in our conceptions of the role of public finance. We no longer look at finance as the master; it has become secondary. We realise that what we have to consider is the fruitful development and utilisation of the whole resources of the country. I very much want to see the Treasury built into a proper place in the structure of the Government as representing the Government's responsible adviser, which pulls together all the threads of economic policy.
There are many things one would like to see. I would like to see a strengthening of the establishment of the higher posts in the Treasury. The higher officials in the Treasury are fantastically overworked. The Treasury has been a very stern applier of its own principles of economy. I would like to see a recognition in the Treasury of the importance of an understanding of the industrial position of the country. The Treasury has had some very good financial advisers, and I am sure that my right hon. Friend feels now what a loss the resignation of Lord Catto will be to him. I want to emphasise the point that the Treasury is now concerned very largely with industry. The times are changing. The role of the City has too long dominated most of our conceptions. That is, perhaps, a strange thing for me to say because I have spent a great deal of my time in the City. The City cannot save us in the difficulties that lie before us, nor can any schemes of international monetary arrangements or international credit, important as they are. All these things will mean nothing if we cannot put our own house of industrial production in order.
Turning to the immediate measures I have very little to say. I hope to say a word later on the question of wages and prices to which my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) referred. Otherwise, I

think that the Chancellor has been very wise to keep our helm lashed to the sound course which has served us well. I am glad that he gave a word of thanks to John Citizen for the part which he has played in the success of our financial arrangements. John Citizen in this country leads the world in his integrity as a taxpaper. He has no equal. A word of praise is also due to all those thousands of voluntary workers who have helped the success of the National Savings campaign.
When I turn to the shape of things to come, so far as Government measures are concerned, as indicated by my right hon. Friend, it seems to me that the shape was all right, but I would have liked to see a little bit more of how it was to be filled in. Generally speaking, however, it bears out what I have already said, that it represented an exceedingly constructive and helpful statement. The research proposals seem to be generous, adequate and welcome. I was particularly interested in what my right hon. Friend said when he recognised that the three processes of original research, development and commercial application have all to be taken together, and that if any one fails the whole fails. I welcome that statement very much.
I wish he had told us a little more of what he is discussing with his colleague the Minister of Fuel and Power in regard to plans for helping the utilisation of oil and of our coal resources. Such information as he gave us referred mainly to the easing of the taxation position. Perhaps at some time or other we may hear from the Government that they are prepared to take a lead in establishing large-scale plants for developing some or these processes. I do not want to press that point any further now, but it seems possible that if we leave the matter entirely to private industry we shall not get progress at the rate which the interests of this country demand.
As to whether the industrial taxation proposals will go far enough I prefer to reserve my judgment. The 20 per cent. initial allowance will be a very great help, but I wonder whether it goes far enough. Replacement costs after the war for buildings and machinery will probably be at least 50 per cent. higher than the book value of the assets, for which provision will have been built up by way of past depreciation. There will be some difficulty in that respect. I want to put in a word


here too on another topic, and to ask my right hon. Friend to give special attention to the subject of double taxation, which does, in various ways, greatly affect our strength in the export trades.
But the main question which we have to ask ourselves is whether the mere removal of taxation obstacles will be enough to turn the activities of this country into the right direction. It will be a very great help, but I think it will not be enough alone. We have to remember the vital importance of allocating a sufficient share of our national resources to the re-equipment of our industries in the early years after the war, when everybody will be busy and it will be possible to sell any kind of rubbish that can be produced. We must not be led astray, in those early years. We must put enough aside so that we shall find our industry first-class in its equipment when we enter oh the difficult period of the normal times thereafter.
I do not want to be critical as regards the details, or to suggest that the proposals of my right hon. Friend are not generous. The important thing is the spirit shown by the Chancellor in what he said, and his conception of the objective at which we have to aim. I was left with the conviction that, if he could be convinced that what he was proposing was not sufficient to achieve his objective, he would be quite ready to consider other proposals. And that brings me to my fourth point, the material used, since the main objective must be the development of our industries in the national interest.

Mr. Gallacher: And not for private profit.

Sir G. Schuster: That is the point I was making. My right hon. Friend has not put forward these proposals for the sake of giving a bonus to any private individuals. Certainly, so far as I have asked for any of them, that was not in my mind. We do not want to make a few rich men richer. We want to establish the national prosperity of this country, and it must be properly distributed. It is up to British industry, when those obstacles are removed, to take advantage of the opportunity provided, in the spirit that industry has to render a national service. I am glad to see the encouragement of free enterprise, nevertheless, I feel that we shall still, for many years to come, require also the organising and

directing power of the State representing the community to guide our activities along the right lines. I would say to leaders of industry that our task—and I can speak perhaps as one of them—is not to resist that kind of directive control, but rather to organise ourselves so that we, in co-operation with the Government, may see that it is exercised wisely, in an expansive way, and not in. a way that will hamper free initiative. Industrial leaders have to be progressive and efficient. Otherwise, public opinion will demand, and rightly demand, new men and a new system.
It is not only leadership which will see us through; there has to be good work all round. I hope that the hon. Member for West Fife (Mr. Gallacher) will take in a good spirit what I now want to say on this matter. We have had a lot of talk about wages and prices. So far as I can exercise my own judgment, I believe that my right hon. Friend has, in a very difficult position, taken the right course. Otherwise, I see us moving to a terribly difficult position, as subsidies increase and we keep prices down. If that were to get too wide, we might well get a situation which it would be almost impossible to handle when we tried to float off again into normal times. I venture therefore to say that I support the judgment of my right hon. Friend in this matter. But I wish we had not had quite so much talk about wages and prices. The relation in which I am interested is earnings and production, because that is the real relationship. I want to see the workers earn more and be equipped with tools which will enable the human factor to produce as much as it is able to produce.
I want to see the workers develop their highest earning power. Above all, I want to remove the fear that labour-saving machinery will mean cutting piece-rates or turning people out of jobs with no chance of finding them again. I am sure that nobody on this side of the House wants to create a state of affairs in which, whenever earnings rise we shall catch up on the workers by raising prices, so that they will not have any real benefit; but we must have it realised that the only basis for higher earnings is higher production. We cannot expect a wholehearted "pull together" if we cannot create confidence that the products of better machines and better human work will be fairly divided in the national interest.
The essential thing is that everybody shall understand the realities of this situation. What each section of workers can get out of the pool, depends upon the size of the common pool, and no section can demand an unfair share out of the pool without damaging other sections. We want to see earnings as high as possible. Do we want the miners' £5 a week that they have got, to be really £5 of genuine purchasing power? Of course we do. Do we want to support—

Mr. Silverman: rose—

Sir G. Schuster: I hope the hon. Member will not interrupt me. I am sure that I am saying things with which he will agree when he reflects.

Mr. Silverman: The hon. Member must not suppose that he is the only man who reflects.

Sir G. Schuster: If the hon. Member wants to interrupt me I give way.

Mr. Gallacher: I am in full agreement with what the hon. Member has been saying about a pool, provided we do not have a pool only for a bunch of profit-making employers.

Sir G. Schuster: If my hon. Friend studies the distribution of national income as shown in the White Paper, he will see that there is not very much more to be got out of the pool at present on the top level. Perhaps I may go on with the series of rhetorical questions that I intended to put. I was asking whether we wanted the miners' £5 to be a genuine £5 of purchasing power, and I say that we do, and so do hon. Members on the other side of the House. Do we want to support a larger number of well-paid workers in education and other non-productive national services? Of course we do. Do we want shorter hours and longer holidays with pay for those who are engaged in production? Of course we do. Do we want those who are old or sick and cannot work, to be kept properly? Of course we do. Do we want to be able to produce the right goods at the right prices, so as to be able to keep our place in the export market? That is something that we must want above everything. We want all those things, but we cannot have them unless every man and woman pulls together.
My right hon. Friend was perfectly right in painting a sombre picture. We shall be up against most terrible difficulties, and there is going to be no room for the shirker in this country. It will be a case of "all hands on deck." I am grateful to my right hon. Friend for having stressed that aspect of the matter and for having shown to us the way in which we can overcome that difficult situation. We must not be daunted by the prospect, but we must realise what it is and what it means. There are lots of slogans going round now. It is very nice to be able to say that difficulties are opportunities. They are; but also they are difficulties, and we have to face them. On this side of the House, in the time to come, we shall want freedom for initiative. Hon. Members on the other side want also to preserve some measure of freedom. We can have freedom only if we use our freedom rightly. The measure of our freedom will be the way in which we use it. If we tackle our problems in that spirit we shall have a chance of doing something not only for ourselves but for the world at large. If we do not do so, then, if I might quote Shakespeare, all our future will be
bound in shallows and in miseries.

Sir Oliver Simmonds: The whole of the Committee expected from the Chancellor an able and lucid speech. In fact, we had much more than that. We had one of the most statesmanlike pronouncements on the financial and economic problems of the State to which hon. Members have listened for many a long day. Without comparing my right hon. Friend with the Noble Lord in the other place, I would say that the Chancellor of the Exchequer has become the practical Minister of Reconstruction in this House. He has done more than any of his colleagues to lay the foundation bricks for the reconstruction programme of the Government.
It has been rather the tradition for the Chancellor of the Exchequer, particularly in relation to trade and industry, to give out his plans for the coming year in penny packets. I think that has had most unfortunate results because trade and industry have never been able to see a far enough horizon and plan accordingly. Yesterday my right hon. Friend unfolded himself upon the future prospects, and I would


like to congratulate him and his colleagues also that they have declared their hand on so many important issues in connection with post-war and financial reconstruction. I would like to follow some of the wise observations which have been made by my hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne). He spoke of the adverse balance that faces us after the war. Without going too much into detail, I would recall to hon. Members that at the outbreak of the war we were virtually balancing our external payments, but even then, on two or three occasions in the '30s we fell behind-hand to the tune of some £40,000,000 or £50,000,000. But after the war, when this disinvestment of which my right hon. Friend spoke yesterday has gone its full course, the best estimates seem to be that even if we restore our export trade to its pre-war level we have still £200,000,000 to make up. We have to find that £200,000,000 or, as my hon. Friend the Member for Kidderminster warned us, we have to reduce our imports accordingly.
This £200,000,000 adverse balance of payments is thus a Sword of Damocles over our visions of the post-war period. There can be no Beveridge, there can be no family allowances on any adequate scale, there can be no increase in old age pensions, unless, first of all, we meet this issue. It must be met by the initiative of our manufacturers and traders, and they can meet it in two ways, not only by developing new markets, but also developing synthetically new products, if necessary, which will obviate the necessity for certain imports. It is thus important that they should be supported on both those lines. Within any foreseeable period after the war I think it will be manifest to all hon. Members that we shall have to use private enterprise as our agent in finding this £200,000,000. Hon. Members opposite may have other ideas for the organisation of the national economy in the distant future, but I think that everyone will agree that for the moment we have to utilise the tools that are at hand. Thus, I trust there will be no objection on the part of hon. Members opposite, whatever views they may hold for the distant future, to supporting the agent which we have with which to wage this struggle. But the agent can never succeed if there is uncertainty and lack of clear direction.
What does comprise private enterprise to-day? Is it and Morris and

Courtaulds and Austin? Yes, it is all these, but in fact they are only a small part of private enterprise. It may surprise some hon. Members to realise that only one-third of the numbers employed in industry are in undertakings where there are over 1,000 workers. On the other hand, even if we omit, as I think we should do, the smallest firms employing up to 10 people, no less than 50 per cent. of our people are employed in undertakings with less than 600 workers. Not only are these the middle stratum of British industry, but they are the backbone of industrial Britain. Above all, they represent half of the workers in Britain, and it is above all that fact that this Committee needs to bear in mind. In what shape will this middle stratum of trade and industry find itself when called upon to play its vital role in what I hope will be a great national exploit, the quest for this £200,000,000?
This is, primarily, an economic and not a political problem, and I am frankly seeking here to avoid all party controversy. The health of the middle stratum of industry should be a particular care of hon. Members opposite on account of the vast numbers of people employed therein. Upon the welfare of this middle stratum depend the lives, prospects and prosperity of millions of workers. The right approach to an inquiry of this kind, as many hon. Members will know, is through a system of sampling, a science which I am glad to say has recently received some considerable impetus. By this we mean that we select a sample of a manageable size, analyse its characteristics, determine them and then see, by wider application, that these factors which we elucidate are in fact common to the whole.
How shall this sampling proceed? With the middle stratum in industry no city is more closely identified than Birmingham, proverbially the city of a thousand trades. The typical industrial organism in Birmingham is not a great public company, but the smaller and more personal unit, usually founded originally by some bright craftsman at the bench, who put his initiative and brain and savings into his little business, until with effort and care it has grown up into an organism employing several hundred workers. That is the Birmingham of today, and of the 12 Parliamentary Divisions in Birmingham, I can say that none


is more typical of the middle stratum than the Division of Duddeston which I have the honour to represent. It is situated hard by the centre of the city. It is composed of some 200 medium sized factories, with the workers employed therein living round them. So I have sought, as my sample, to find out what is the situation in these factories, and what are the prospects of those workers. I have been assisted here by some 30 companies in my division.
What do we find? The answer is clear and unambiguous. They are in good heart, but they lack the financial strength for the day—for facing this postwar issue of the £200,000,000 sterling. Thousands of letters in the Press illuminated with much detail, have, over the last few years, drawn our attention to the adverse effects of E.P.T., and have claimed that this House, certainly not by intent, but by mischance, perhaps even by oversight, has dealt harshly with this middle stratum of industry and undermined its strength. As we analyse our sample, let us try to detect how much truth there may be in the assertions that have been made in these letters.
Every hon. Member will be aware that there is strong justification for fixing a tax effectively limiting the retained profits on war contracts to a reasonable figure, but in the case of the middle stratum in industry, does E.P.T. do this? That is a question I would ask the Committee to observe. Surely, it is an unexceptionable proposition that the financial reward on war contracts should be in relation to the magnitude of the service rendered. The service rendered is expressed industrially by turnover, the financial reward is, substantially, the standard under E.P.T., fixed basically with reference to the profits of certain pre-war years and subject to current Income Tax. In the case of our sample of some 30 companies, what do we find this relation to be—the relation of standard to turnover? Of the 30 odd companies under review several have standards under 2 per cent. of their annual turnover. In the case of no less than a quarter of these companies the percentage ratio of the standard to, turnover is less than 4 per cent. Equally, in the case of a quarter of the companies the percentage ratio is over 10 per cent. These are the lucky ones and the excep-

tions, necessarily, but let it not be assumed that they are the ones that have rendered the greatest service to the nation. They are probably the companies which had some non-military work in times of peace, and have carried forward, without making any particularly different contribution to the national economy in the time of war from what they were making in times of peace. But what in fact does that 4 per cent. figure mean? When Income Tax has been paid, when war damage premiums which hon. Members will recall are not a charge against revenue but against capital have been deducted, and when various items effectively of a capital nature but disallowed by the Revenue, have been deducted, the retained profits cannot well exceed 1 per cent. of the turnover. No business can remain healthy on that basis.
In all good undertakings profits, as hon. Members are well aware, are to some extent ploughed back into the business. In the case of the middle stratum of industry, this is particularly true, and referring to our sample, in the case of four companies I find that the whole of the profits in the three pre-war years were ploughed back. Of the whole of the 30 companies, well over half of the profits were ploughed back. It is abundantly clear that when we fix profits at an artificially low figure, we are not so much preventing large dividends for shareholders as robbing the companies of their very life-blood. In effect, the incidence of E.P.T. as regards these ploughed-in profits has been aggravated, as the hon. Member for Kidderminster observed, by the increased cost of equipment and labour.

Mr. Stokes: When speaking about these companies which have had their ploughed-in profits disallowed—I am familiar with the point—could the hon. Member tell the Committee whether, in his examination of these accounts, he has found that the cost of maintenance has gone up, or has remained approximately the same?

Sir O Simmonds: I shall be very happy to discuss that matter with my hon. Friend if he wishes to do so, and to elucidate any point to which he desires to refer subsequently, but I cannot see that it is quite relevant to the point I am now trying to make. The Chancellor said yesterday that wage rates had in-


creased by about 40 per cent. That means that, for a given some of money—and the standard is a sum of money—these companies can purchase less new machinery than they could have purchased in the pre-war period. Thus, in effect, E.P.T. has sorely reduced the power of an undertaking to modernise and develop, even judged by pre-war standards, and this at a time when Ministers are calling upon industry, with one voice, to reconquer the export markets. I can sum up my analysis by observing that by the system of E.P.T. we shall leave this great middle stratum of industry gravely lacking in adequate reserves to meet the coming tasks. Hon. Members may ask me why I have compared standard to turnover and not to capital employed. I would say that the degree of exhaustion should be compared with the reserve. The degree of exhaustion has nothing to do with the capital, which is some almost fictitious figure to represent the assets in the business, which have been written down for a period of years. Therefore, I claim that turnover is the more proper and exact figure to take when you are endeavouring to find out how healthy these businesses will be after the war and whether their reserves will be adequate.
I was delighted that the Chancellor decided to help the smallest companies by his grant of an extra £1,000 towards their standard. That was a splendid gesture. But, excepting that—and, frankly, such a contribution does not enter into the case of the companies of the middle stratum at all—the Chancellor, as far as I can see, did not touch this aspect of the problem, as it affects the immediate postwar period. As analyse them, none of the concessions which he made will materially help companies to restart their peacetime export machinery until three or four years after the armistice. Those first two years are the vital years. It is most important that we should see that the middle stratum of industry, in its quest to do its part for this £200,000,000, should not be placed in this difficult and embarrassing position, caused, as I think, largely by lack of foresight in the past. We must not allow this situation to continue.
What can be done? The Chancellor has said that he must retain too per cent. E.P.T. in war-time. As to whether that is vital or not, we all have our own ideas, but it is a strong pyschological point, I have no doubt. I would make this sug-

gestion, which is a small and simple one. Let him agree to a reasonable minimum below which the standard shall not be allowed to fall in relation to the turnover. The aim would be to assure to each company, between now and the end of the war, some additional financial reserve of strength. I think that a limit should be placed on the amount of profit that could be distributed by companies. Such a suggestion is not only fair, but it irons out the difficulties of those companies which have a minimum standard, and it is simple, which is the essential factor in any change. It would relieve those undertakings which at the moment are subject to a monstrous injustice, and it would help to put them on their feet. This will be a gracious act to those companies in the middle stratum, comparable to the £1,000 which he has granted to the smaller companies.
One passage in the Chancellor's statement yesterday particularly struck me. He said:
If we are to avoid a drastic curtailment in our volume of imports such as might threaten our standard of life and gravely prejudice our prospects of active employment, it will be indispensable for us to increase our exports, and recapture some of the trade which we lost in the inter-war years. That will he a matter of life and death to us." —[OFFICIAL REPORT, 25th April, 1944; col. 666, Vol. 399]
I would think that, in the light of the analysis which I have made and the sample which I have taken, which can be backed up by other Members, from experience in their own constituencies, it remains for the Chancellor to do something for these companies in the middle stratum, so that they may play their full part in this great post-war quest. He has yet to round off the proposals which he made yesterday by putting these companies in a more vigorous and heartened condition to engage in that struggle.

Mr. Douglas: The Chancellor may certainly count himself fortunate that he is able in the fifth year of the war to introduce a Budget which makes no increase in taxation. That is a unique position. Not content with that, he has actually gone to the extent of making some remission, to which the hon. Member for Duddeston (Sir O. Simmonds) has referred, in the Excess Profits Tax, and a promise of more remission of taxation to come. It was not surprising that there was no increase of


taxation in the Budget. The framework of the national finances was so altered by the introduction of pay-as-you-earn that it became impossible to alter the rates of Income Tax in the Budget, because the financial year has already commenced, and if an alteration had been made, either in the rate of Income Tax or in the abatements or allowances, the whole structure of pay-as-you-earn would have been upset. It would have been extremely unfair, if Income Tax remained at its present level, for any increase to be made in indirect taxation. Therefore, I think, the Chancellor was, in any event, forced into the position that no appreciable increase in taxation could be made in this Budget.
Let me turn to the general proposition which the Chancellor laid down for the future, that he intended to adjust our system of taxation so as to encourage production. I accept that as a legitimate and proper object of public policy, although many proposals which are made for that purpose are not in the end calculated to effect it, and are in many instances directed to the protection of particular enterprises, with a detriment to the national economy as a whole. They will not bear economic analysis. But it is a proper object of fiscal policy to encourage the greater production of wealth in this country, and it may be that the relief which is given to the smaller enterprises which are subject to the Excess Profits Tax will have that effect, because it will give a greater incentive to those who own and control them to extend and to develop their enterprise, because they will get a greater degree of reward out of it. It might also be defended on an entirely different line of argument, which was not mentioned by the Chancellor but which deserves cow sideration. That is, that some degree of relief to enterprises of the smaller dimensions may help to turn the trend towards concentration and trustification of industry which is only too apparent at present. If the concession which the Chancellor has made were to have that effect, I should certainly welcome it as a healthy reversal of national policy.
But when we consider this problem of the encouragement of national production by the alteration of our fiscal policy, I would ask the Committee to consider

the economic basis of this proposal. The concession which has been promised by the Chancellor is in respect of depreciation of plant, equipment, and buildings. The major part of it is a promise of 20 per cent. depreciation allowance on new plant and equipment in the first year after they are installed. That represents, as I understand it, an acceleration of the depreciation allowances to which the owner will in the end be entitled, but not an increase in the ultimate total. It means, in effect, that the State is going to subsidise, to the extent of 20 per cent. or to the extent of the difference between the 20 per cent. and the amount of allowance which would be given under the existing system, the installation of new plant and machinery. The total amount involved in this, during the first years immediately succeeding the peace or armistice, may be in total an enormous figure. There is no question that repair, replacement and so on have been, during the war, slowed down, and in many cases stopped, except in those industries which are engaged upon production which was necessary for the war effort. The arrears of replacement in other industries must be of extremely large dimensions, and, therefore, the concession which the Chancellor has promised in this respect must involve a very large ultimate charge upon the Exchequer.
Where is the money to come from in order to meet this deficiency of revenue? It is perfectly clear, from the statement which the Chancellor has made, and I think it must be evident to every hon. Member of the Committee, that there can be no very great and rapid diminution in the amount of taxation which will be required even after the war is over. There will, no doubt, be a diminution, and perhaps extinction, of borrowing, but the need for taxation must continue to be upon a very high level. If these concessions are made in the depreciation allowances, and, consequently, in the amount of taxation which is levied upon industrial and productive enterprise of all kinds, it must inevitably follow that the amount of the reduction of taxation which other payers of Income Tax will be able to expect is correspondingly diminished. It means that the ordinary workmen and salaried employees will have to contribute towards this concession, which is given to certain classes of the population, and I want to remind the Committee of the


extent to which indirect taxation has now risen.
It is an enormous tax, spread over the population, broadly speaking, more or less equally, but it is taxation not according to ability to pay, but which, from its very nature, must inevitably fail with heaviest effect upon those least able to bear it, and every concession of the nature which the Chancellor indicated will tend to retard the reduction of that taxation which is falling with so very great effect at the present moment. As I have said, I accept the general proposition that it is proper for the State to encourage production, if it can do so. I want to suggest to the Committee that sufficient attention has not been given to the foundations of policy with regard to that.
The distinction which has been drawn in the past between earned and unearned income has been very much diminished during the war. The allowance on earned income amounts now to only one-tenth, and the differentiation between earned and unearned income is now very much smaller that it has been for a great many years past. In fact, it is much smaller, if I recollect rightly, than it ever has been since the time that the distinction was first introduced into our income tax system, and that is something which calls for redress if we are going to follow the policy of encouraging productive effort. The productive effort of the worker, whether he is a manual worker, a salaried worker, or whatever else he may be, deserves as much encouragement as that of anybody else. The concession which the Chancellor has made in depreciation allowances is in respect of what are called, broadly speaking, wasting assets—plant, machinery and equipment which has got a limited life and which requires to be renewed. But let me remind the Committee that the workman or salaried worker gets his income from a wasting asset—his working life, which has only got a certain length to run—and he ought to be given the concession, and a more generous concession, in respect of relief on earned income, in order that he shall be compensated for—

Whereupon The YEOMAN USHER OE THE BLACK ROD being come with a Message, The CHAIRMAN left the Chair.

Mr. SPEAKER resumed the Chair.

ROYAL ASSENY

Message to attend the Lords Commissioners.

The House went; and, having returned—

Mr. SPEAKER reported the Royal Assent to:

1. Army and Air Force (Annual) Act, 1944.
2. Jewish Colonization Association Act, 1944.

WAYS AND MEANS

Again considered in Committee.

[Major MILNER in the Chair]

Question again proposed,
That it is expedient to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance.

Mr. Douglas: When our proceedings were interrupted I was drawing attention to the extent to which the differentiation between Income Tax on earned and unearned incomes had been diminished during the course of the war. I want to go a little further with regard to that and to suggest that no adequate criterion has been devised to cover the whole range of differences between earned and unearned income, and in particular, our system of taxation has treated as absolutely identical, income from land values and income from the investment of capital on buildings, machinery and plant, whereas the one is entirley due to general community influences and the other to individual effort and expenditure. The processes of differentiation between earned and unearned income ought to be carried out in that direction, so as to relieve the development of industry generally by means of fixed improvements, and at the same time, by maintaining or increasing the rates of taxation which fall upon the value of land, to take a part at any rate of an entirely unearned income for the benefit of the community generally.
This matter is of exceptionally great importance at the present time, when the nation is faced with a very great shortage of housing, when it is necessary that the building of houses should be encouraged as much as possible, and they should be available to those who occupy them at the lowest rents which can be achieved.


As long as our system of taxation, local as well as national, continues to impose a very large burden upon the provision of housing accommodation, it will be difficult, and increasingly difficult if present trends of taxation continue, to provide that accommodation in the quantity and at the rents at which it ought to be provided. There is a field of reform in which the Chancellor, if he would, could do something of the very greatest value towards encouraging industry generally not merely by the relief of taxation upon the produced articles, but by a general levy of taxation upon land, whether it is used or whether it is not used, in order to ensure that it will become available for use without being held for speculative purposes and will become available for use at a reasonable price.
This Budget contains no increase of taxation but it does, in effect, contain a threat of an increase in taxation, because the Chancellor has intimated that he contemplates reducing the amount of the subsidy which has been given for the purpose of keeping down the cost of living. That in effect will be equivalent to an increase in taxation. The subsidisation of the price of food is a compensation for increase of taxation which has been imposed upon the general mass of the people. It is a compensation for the very large amount of indirect taxation which is being levied at the present moment. If that Exchequer assistance towards keeping down the price of food or other essential commodities is withdrawn, in whole or in part, it is virtually equivalent to an increase of taxation and one which will fall most severely upon those who are most necessitous.
The mention of this by the Chancellor of the Exchequer is an admission that inflation has already taken place in this country. Unless that is so, there is no justification for the course of action which he is proposing to take because it is based upon the argument that the price level has changed and that the rates of wages have got out of proportion with the prices of commodities. That is simply a statement that inflation is already taking place in this country. If that is so, it is the business of the Chancellor of the Exchequer to stop it at the source and not to attempt to readjust matters at the expense of those in the community who

are most necessitous. That is not the way in which this problem should be tackled. That inflation is taking place—of which there are other signs besides this —is going to make the whole approach to our post-war problems more difficult. It is going to make it more troublesome to arrive at rates of exchange after the war with other countries which will facilitate the import into this country of the food, raw materials and other commodities that it is absolutely essential we should have in order that our industry shall be set going and that our production shall be raised to the highest possible point.
It is distinctly an alarming position to see that the Chancellor of the Exchequer has, in effect, made the admission of the existence of inflation, and that he does not propose to go to the root of the trouble, but proposes to take a step which is likely to have the result of speeding on the process of inflation by calling for more increases in prices. That is a situation which I do not believe this Committee can contemplate with equanimity. It would be far better if the Chancellor of the Exchequer would apply the methods, which to a great extent have been applied successfully hitherto, of increasing taxation and diminishing spending power rather than that we should pursue the opposite course of allowing spending power to increase, increasing the amount of money in circulation, raising the general price level, and making the whole readjustment of our economy for the postwar situation more difficult than otherwise it would be. I beg of him to look at this problem again and to see whether there is not a better approach to it than that which he has indicated in his Budget statement.

Mr. Craik Henderson: In the course of the Budget speech we all must have had a certain feeling of sadness in missing a familiar figure at that Box. The late Chancellor of the Exchequer was always lucid and cheerful. We all feel that in the early difficult years of the war he did an extraordinarily good job in dealing with our national finances. We have the satisfaction of knowing that the war has been well conducted, and with fewer mistakes than were to be expected owing to the gigantic nature of it, but in no sphere have our affairs been so well conducted as by the Chancellor and the


Treasury. Yesterday the new Chancellor took his stand. The late Chancellor had many great problems in connection with the financing of the war, and the problem of preventing, as far as possible, inflation. The new Chancellor also has that problem. I agree with the hon. Member for North Battersea (Mr. Douglas) who said that he had to face inflation, but the Chancellor is also going to have the equally great problem of preparing the ground for the recovery of this country and for the transition from war conditions to peace conditions. Yesterday, we all felt that he had made an extraordinarily good start, and we certainly wish him good luck in a very difficult job. The whole Budget was so full of interest that one does not know where to start, and where one would end if we attempted to deal with the fascinating questions that were raised by the Chancellor.
I think, however, the most grave question at the moment is the fact that we have been forced to some extent off our stabilisation policy. Apparently we are still going to try to stabilise the price of commodities, but instead of between 25 and 30 we are going on to 30 to 35. That, I believe, is calculated to be an increase of £45,000,000 to £50,000,000 in the price of commodities. If we are in the spiral of inflation then there is no certainty that we are going to be able to hold it at 35, and it is a very serious problem indeed for everyone, and requires the serious attention of the Chancellor and of the Committee. The last speaker said he was sorry the Chancellor was not getting at the root of the matter, but it is very arguable what is the root of the matter, and I confess, like the last speaker, and the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) and others, that I have a little doubt as to the rightness of the Chancellor's policy in this respect. The Chancellor stated that wage rates had increased to 40 per cent. over pre-war wage rates, but of course it is quite obvious that earnings have increased by a very much greater figure. I think it would be admitted by hon. Members on all sides that the free spending power is in the hands of certain sections of the wage earners and the question is, how in the national interest to prevent inflation and ensure that spending power should be used better in the national interest than by being spent on the purchase of commodities which are in short supply. I am afraid that the

increase in the cost of living may lead to further inflation.
I suggest to the Chancellor that he must also consider offering some alternative form of loan which would appeal more to the working man than existing forms of loan. National War Savings Certificates are good and 3 per cent. Savings Bonds and 2½ per cent, bonds are excellent, but the question of Income Tax comes in. The present 'Government loans make no particular appeal to the man who has not been in the habit of saving and does not understand the principles of investment. In order to take this excess spending power out of the hands of those people we must evolve some form of national loan which will attract them to invest. The suggestion I am going to make, which I have made before, is not made because I particularly like this form of investment but because I think it is the only way to meet the problem. In the last war we had Premium Bonds which gave £7 or £10 of premium on drawing to the people whose bonds were drawn. I suggest we have to go further in this war. We must attract the working man investor into putting his money into a loan which gives him either a small rate of interest or no rate of interest but on which prizes are paid out by drawings. That will attract a class which previously has not been prepared to invest in any of the existing war loans.
Let me give an example. There might be bonds of £5 each which could be collected in the usual way by War Savings Committees in small sums. I think there would require to be a limit on the maximum amount to be invested in this way of say £500. I think it could be done at 1 per cent, free of Income Tax. Suppose you attracted, as I am sure you could very easily, £100,000,000 or more and you allowed 1 per cent, for drawings, you might be able to offer four prizes of £25,000, ten at £10,000, 200 at £1,000, 400 at £500 and 4,000 at £100. I only give these as examples of what might be done. Other hon. Members might have better ways to suggest. I am not urging this because I particularly like such a form of loan. I know it is contrary to the conservative traditions of some hon. Members and of some financiers, but the point is that the position is critical and the surplus spending power of certain people who are not investing in existing


loans must be turned into proper channels. From the moral point of view this would have the effect of making a man save and at the end of 5 or 10 years he would get his money back in full, while if he got a prize as well so much the better. At any rate, at the worst he would get his money back in full. The point I make above all is that this method would offer an attraction which no other form of Government loan does, and would remove some of the surplus spending power which to some extent is responsible for the inflation which I, personally, believe is already very noticeable. I ask the Chancellor if he will consider this matter sympathetically and not turn it down because it is not in conformity with the usual views of the Bank of England or of the Treasury.

Lieut.-Commander Gurney Braithwaite: May I put a point? It is quite true that there is a precedent for this suggestion in that during the last war we had the Victory 4 per cent. Bonds redeemable by drawings at par which, I am afraid, were mostly associated in the public mind with the late Horatio Bottomley. Apart from safeguards against manipulations of that kind taking place again, how would the hon. Member deal with the situation which did in fact arise with the Victory Bonds when they rose in the market above par and those whose bonds were drawn found themselves penalised instead of benefited?

Mr. Craik Henderson: That point would not arise under the scheme I am talking about. The case the hon. and gallant Member has in mind is where bonds were issued at, say, 93 and repaid by drawings at 100, or issued at 100 and repaid at 110. It is true that in the last war we had that situation to which my hon. and gallant Friend refers, but in this scheme there would be no rising or falling above par value at all and there would be no quotation on the Stock Exchange. I would like to see a fixed date of five or ten years at the end of which they would either be paid out in full or an opportunity would be given to renew and, during that time, the r per cent. normally paid in interest would be used to pay premiums, whether in larger or smaller sums. I hope the Chancellor will give this matter some consideration.
I would also like to ask the Chancellor to give us some more enlightenment on post-war credits. According to the Financial Statement there is already a sum of £350,000,000 accrued, in addition to the post-war credits that will be payable in respect of E.P.T. I should think that E.P.T. will be of at least an equal amount, though it is impossible to calculate. It depends, of course, on how long the Chancellor keeps it on and also whether we run into a period when smaller profits are being made. E.P.T. has one very interesting feature in that it forms, to some extent, a mattress on which to fall back when trade is not so good within the limit of the period for which the Chancellor continues E.P.T. What I mean is that a firm become liable to E.P.T. when they have a good year and then there comes a period when trade is not so good, for example, during the change-over from war to peace, and they make losses. In that case they have a claim against the Treasury for refund of E.P.T. and that, to some extent, provides a cushion. The old-fashioned Treasury attitude—I do not mean that the Treasury is old fashioned at the moment, I mean the Treasury attitude of former times—would have been, whenever it looked as if we were going to have a bad patch, to bring E.P.T. to an end. I am surprised that the country as a whole has not paid more attention to the future possibilities of something like postwar credits, because they too might form something in the nature of a buffer which might be used to tide over periods of slump. I do not know whether the Treasury has that in mind for the future. If the taxpayer were compelled to pay something in periods of prosperity which would be repaid to him, like E.P.T. in times when there was a danger of restriction of Tending, then that might help to level out things and modify slumps and booms. [An HON. MEMBER: "Have a means test."]
The Chancellor has, I think, made a very sound start in his first Budget speech. I am sure that industry will appreciate very much the concession he has made to E.P.T. I see it is going to cost about £12,500,000. That is a considerable sum, and in the White Paper it is said that the allowance for Income Tax has been taken into account. This concession helps the small man but it does not iron out the many anomalies which exist to-day. I know the diffi-


culties the Chancellor is facing and I think he has made a very considerable concession and as big a concession as one could expect at the moment. If, however, without conceding much more in the way of money he could try to iron out the extraordinary anomalies which, though they may not amount to so much in money, cause a tremendous feeling of bitterness amongst the commercial community, I think he would be doing a good piece of work. I think the Committee will feel that the concession he has promised for the future for depreciation and so on shows that the Treasury is progressive and realises the problem we have to face in the future, but the best that can happen in the next year is not entirely within the Chancellor's own control. I hope it will happen, and if it does, I think we will all agree that it will do more for this country and finance than even the Chancellor himself can do. I hope that when next he stands at that Box on Budget Day he will be dealing with a financial position based on Germany having been defeated. That will represent a great step forward towards the financial stability which we all desire. The sooner that comes, the better for the country and, unquestionably, an early defeat of Germany would make things much easier for the Chancellor. We all wish the Chancellor of the Exchequer every success in the very difficult duties he will have to perform in the next few years. He will require all our good wishes and I am sure he will have them.

Lord Fermoy: It is with very great satisfaction that I return to this House after eight years to hear such a statesmanlike Budget in which there is no fresh taxation. I well remember in 1924 or 1925 having to return to my constituents with many taxes which were very unpopular. I feel sure that most of my hon. Friends in the House this week-end will be very happy to face their constituents. There are two things in the Budget which I would like to talk about. The first is agriculture, and I am sure we were all very pleased to hear that there were going to be further loans for that great industry. For many years Norfolk was a distressed area, but the war has done remarkable things in bringing about prosperity in Norfolk, and I am sure that my farmer constituents will be glad to

hear of these further loans. The whole county has changed. If I may put in a personal note, from Sandringham I can now see the park which some ten years ago had 300 deer and a golf course, but is now a huge farm producing food for the country. As most hon. Members know, farming is a very difficult industry, because we never have the money at the right time; but I am sure that the Norfolk farmers will be very glad to hear that they are going to have money provided to, help carry on their industry.
About the car tax. A farmer has a car and pays this very high 'tax although, perhaps, he uses it only once a week to go to the local market. I have always been a great believer in the Petrol Tax. Last summer I had the opportunity of going to America. There cars of all types and categories, whether of 10 or 40 horsepower, pay the same tax. More revenue is derived from the higher horse-power car through the Petrol Tax, and I feel sure that the Chancellor of the Exchequer, in his wisdom, will derive higher taxation on the same basis.
When I was in King's Lynn over the week-end I found that most of my constituents expected further taxation and I feel sure, if I may make one or two suggestions, that the Chancellor will not take them amiss. I have always wondered why we have not, as in the case of beer and tobacco, tackled our daily newspapers. Does the Chancellor realise that if he put a penny on the daily papers he would receive something between £10,000,000 and £20,000,000 a year in revenue? That would be a very welcome asset to his Budget, and I am also sure that the average person would not object to the extra charge. I feel, also, that we could increase the poundage charge on postal orders, if only because one of the most annoying things is to have to wait for our halfpenny change. I think that the rounding off of poundage on postal and money orders would do a great service to the country and expedite the issuing of those orders. I also feel that telegram charges are very low. When I was in the States last summer and had occasion to send a telegram to California, I was amazed at the expense. I was told, however, that I was using some 3,000,000 dollars' worth of apparatus in California. We all know that distances in this country


are not very great, but I think the Chancellor could introduce zones, so that we would perhaps pay more when sending some telegrams. We are asked to send fewer and that, perhaps, would be a deterrent. I think it would be something which the public would be very glad to pay. I am sure that from all sides of the Committee we congratulate the Chancellor on his very fine Budget. In the Press and, indeed, throughout the country, we have heard nothing but praise for his help. He has followed a gentleman who was very much respected, and I am sure we all extend to him our very good wishes and are prepared to do all we can to help him in this Finance Bill.

Major Beech: May I ask the House for the indulgence which I understand it always accords on occasions such as this? I think I may more easily earn that indulgence if I warn the Committee at once that I intend to be particularly brief on this occasion. I hope that hon. Members will not think it inappropriate if I do not take part in the various arguments that have been put forward by other speakers who have taken part in the Debate up to now, but I do, for one or two reasons, wish to say just a few words. Primarily, I want to congratulate the Chancellor of the Exchequer on what I call his brilliant Budget Statement of yesterday. To me it was brilliant for two or three reasons. First of all, I would suggest, it was brilliant for the method of its delivery, an example to many of us. It was brilliant for the clarity with which he put forward a very difficult subject indeed. It was brilliant, it seemed to me—and there is a good deal of agreement about this—because it imposed no fresh taxation, and, while I am certain that some hon. Members will endeavour to controvert that point of view, in the main I think there will be general agreement about it. I would like, if I am not out of Order in adding to the congratulations which I tender to him for his statement in Committee yesterday, to make reference to what I shall call his fireside talk at 9.20 last night. That talk vas listened to by millions as against the hundreds who heard him in this House and I am sure that the appeal-which he made for still further savings will not fall on deaf ears.
I also want to take this opportunity of saying a few words by way of thanks to the Chancellor of the Exchequer for the many kind references which he made to his predecessor in office. As we all know, Sir Kingsley Wood was an honoured Member of this House for very many years. He occupied various high positions in the Government from time to time and, I suggest, he filled those various positions with satisfaction to this House, to his constituents, and to the good of his country. Therefore, I would like to thank the Chancellor for what he said about Sir Kingsley yesterday, and I do so in the name of the constituents whom Sir Kingsley Wood formerly represented and who now send me here in his place.
There are many hon. Members who want to take part in this Debate and who are much more competent to make excursions into the realm of finance than I am, but I would like to say that it was with no small gratitude that we heard that the black draught which the Chancellor had in mind—he only foreshadowed it; he did not tell us it was bound to come—might even be obviated, and so he concluded his speech yesterday with words which I think will become classics in the future. His words were "The mixture is the same as before." I do not think anyone needs to be a great financier to realise that the proposals which were put into force by the late Sir Kingsley Wood and which have been adopted and implemented by our present Chancellor will produce the money that we want for the good government of this country. One last word. I want to thank the Chancellor for telling us, as he did in perfectly plain language, that the Government are now taking into account financial considerations which must operate in the post-war period both with regard to scientific research and also to the rehabilitation of industry. For the reasons I have given, it was my wish—and I am grateful to the Committee for allowing me—to intervene in this Debate to-day.

Mr. Graham White: The hon. and gallant Member for West Woolwich (Major Beech) may be certain that this House would give a most sympathetic reception to any one who succeeded a man who was endeared to the majority, and, in fact, to all of us. I would like to add that, having heard the hon. and gallant Member speak to-day, we are glad


to welcome him for his own sake and look forward to hearing him again. Many references have been made and much testimony has been given to the work of Sir Kingsley Wood, but I think that in all probability the most remarkable tribute of all is one which has not been spoken at all. That is, that his successor to-day, in the fifth year of the war, has produced a Budget on almost precisely the same lines as that which Sir Kingsley Wood built up in the three years from the time he took over the Chancellorship. We are now fully mobilised and the pattern of our whole finance has been well defined and is running as smoothly as such a machine could be expected to run. Some remarkable things are happening under it. Our expenditure on unemployment insurance, for example, is now less than the amount of money which is received in income from the investments of that Fund. There is the remarkable evidence of the extent of our mobilisation and also of our production. It follows, therefore, that if we are to have increased efficiency in the war it can be only by greater attention to scientific development and matters connected with our financial and industrial organisation.
We are indebted to the Chancellor for the indication he has given of the direction in which he is turning towards the future. He has gone for those things which are first priorities, namely, those things which will increase our productive capacity. If we cannot renew our capital equipment and increase the application of our scientific knowledge and research we can do nothing. The Chancellor's Budgetary task this year has been comparatively simple to what it will be when the war is over, when he will be confronted with problems calling for all his ingenuity, wisdom, courage and prudence. Then there will, indeed, be questions of priorities to consider, the question of how to release post-war credits in relation to the supply of goods and a multitude of other questions of that order. To tackle those problems it will be very much easier if we have a clear picture in our minds of what we want to do, the role in which we want this small island to be cast. We are precluded by the size of our population from aspiring to the military leadership of the world, even if we wished for such a thing, and the same reason may very well prevent us from casting ourselves in the role of industrial

supremacy. Therefore, one of the most important functions we can perform when the war comes to an end is to present ourselves as the most perfect example of a working democracy, as an example to the people of prostrate Europe.
That brings into the picture of priorities all questions of social security and the like, upon which our people have set their hearts and upon which already so much valuable work has been done. The proposals the Chancellor has made in his Budget are fundamental to the possibility of carrying out any system of social security and, indeed, any ordered development of the standard of life of the individuals of this country after the war. If we can learn to increase the output per man-hour or per woman-hour then we shall do something which will give us not only more in terms of money but also in terms of goods. To my mind the most disconcerting thing the Chancellor had to disclose to us, and properly disclose, was his reference to the result of rising costs and wages. I think the decision that we shall have to vary the stability of the cost of living was unfortunate. Other speakers have mentioned some of the disadvantages which, will flow from that procedure, one being that while it is a matter of small consequence to very many people it will press hardly on the class of people we have been trying to help during the past few years. It takes away with one hand what we have granted to pensioners, and the like, with the other. But I do not know what we can do about it. We cannot go back on arrangements which have been made, even if we wish to do so.
In June, 1940, the-Lord President of the Council came to the House and said that the Government proposed to take power to conscript the lives of men and property. The measure with which we have departed from that is the measure of the difficulties we are making for ourselves at the present time. When the Chancellor was putting this matter before the Committee yesterday there were some interjections about profits and the part they played in bringing about this situation. One Member interjected a genial observation about gangs of robbers, and there was a further interjection about rapacious profit-making employers. The Chancellor, except by inference, did not deal with the part profits had played in the situation and I think it might be use-


ful if a word or two was said about that aspect of the matter now. If it is the case that gangs of robbers are preying on our economic development then the sooner the evidence is produced the better. If they have escaped from the efficient net of the Board of Inland Revenue and the Treasury, and the attentions of the police, who are not ineffective in these matters, the evidence should be brought forward and they should be indicted and the position brought to an end.

Mr. Stokes: What about the landlords?

Mr. Graham White: I am dealing at the moment not with landlords but with profits. What is the situation with regard to profits? Very largely, they have been stabilised since the war started. In 1939, when Income Tax was 5s, 6d. in the £ the amount of profits distributed to ordinary shareholders in this country was £36,800,000 out of a total of £47,500,000. A year later, when profits had been reduced to £43,500,000, the amount handed over to shareholders was 21 68 millions. Nobody who pays any attention to what I do or say here will think for one moment that I stand here to argue, in favour of profiteers or anything of that kind, but when we are dealing with these matters it is just as well that we should look at the facts and try to get them straight, because it helps to a community of interest and sound foundations for action.
We have been told that it is the policy of this country now to shape its economic policy towards full employment and expansion. I associate myself cordially and strongly with what has been said by my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) about making a concerted effort to improve not only the standard of well-being of our own people but the well-being of all the people of the world. Surely we have turned our backs for all time on the policy of restriction, that cowardly policy which prevailed between the wars. We have now moved towards the conception that if we are to have competition it will not be on the policy of beggar-my-neighbour, which was the policy for so long. There must be a policy of rendering greater service to other countries, by producing goods more efficiently, not necessarily more cheaply, but of superior quality. I

notice that from time to time there have been rumblings of the old controversies and methods. We do not want that; a new standard has been set in international finance by some of the remarkable international actions which have come about in the course of this war. Lend-Lease, for example, is the greatest commercial transaction which has ever taken place. It is the only successful act of Socialism on a large scale that I have ever known. It is a perfect example of from each according to his needs and to each according to his necessities. It has been an amazing success.
Are we to go back to the old policy of beggar-my-neighbour or are we not? Take the act of generosity of Canada, in their contribution towards this country. We cannot over emphasise the importance of these matters, which are an example to the world of practical aid in the day-to-day conduct of our warlike operations and also an indication of a higher standard of human conduct in international affairs. Let us be under no illusions as to our prospects, financially and economically, when the war ends. There will be uncertainties, difficulties and dangers, but if we proceed with courage and foresight there is no reason why we should not only make a powerful contribution towards maintaining social security and a better standard of life in this country but also a substantial contribution to the rebuilding of Europe and improving the standard of life all over the world.

Mr. Benson: I think it was Burke who said:
To tax and to please, no more than to love and to be wise, is not given to men.
I think the late Sir Kingsley Wood and the present Chancellor of the Exchequer have rather disproved Burke's pessimism, for I do not think that the late Chancellor of the Exchequer could have complained about the reception of his Budgets or that the present Chancellor will complain about the reception which his Budget received yesterday. If any criticism in the last three or four years has been offered to Chancellors of the Exchequer, it is rather that they have been too generous than too severe. This Budget and the last two have been so much in consonance with the feeling of the House that it is very difficult to criticise. But I think that, on one point at any


rate, the right hon. Gentleman was definitely out of touch with the feeling of the Committee, and that is in the matter of allowing the cost-of-living figures to rise, rather than increase the present subsidies. One realises the undesirability of having to keep down prices by subsidies but, when you consider the mere fact that in the fifth year of the war subsidies are still under £200,000,000, I think that is a tribute to the country. I am not quite sure whether the right hon. Gentleman has as his object the saving of money to the Exchequer but, if he has, he is not likely to achieve it. So many wages are linked with the cost of living by a sliding scale that anything he saves in his subsidies, would be very likely to be lost by increases in wages and, moreover, increases of wages in one trade tend to stimulate demand in other trades. The only effect of allowing our price levels to rise will be to increase our cost structure, without saving anything to the Exchequer.
The hon. Member for North-East Leeds (Mr. Craik Henderson) suggested that we should have to take very vigorous steps if we were to hold inflation in check. He was suggesting that our savings machinery was in parlous danger. I think, particularly in view of the Chancellor's proposal to allow the cost of living to rise, it is as well to draw attention to the fact that not only is Government expenditure the prime economic factor to-day but the increase in Government expenditure, the increase in the national income and the increase in our revenue and savings are practically equal because they are really three aspects of the same problem. If we compare Government expenditure in 1943 with that of 1940 the first year of the war, we find that the increase has been something like £2,400,000,000. Meanwhile, the national income has increased by £2,300,000,000, and the revenue plus personal savings, has also increased by £2,300,000,000. They are in fact the same figure, and to allow the cost of living to increase would merely mean an increase of all three of those figures.
The figures have another bearing. In view of the fact that the material goods that are available for consumption are limited, and are likely to decrease rather than to increase, increases in wages and allowances, obviously, cannot bring any increase in consumption and, as the

figures show, increases in allowances and wages are in effect given provided they are not spent. The mere fact that in the last five years the increase in wages, etc., has been £2,300,000,000, and that the receipts by the Chancellor of taxes and savings have been exactly the same figure, makes it quite obvious that wage and allowance increases are very largely bookkeeping operations, the effect of which is to increase our prices and costs structure. There may be various advantages obtainable by various sections of the community temporarily, but the fact remains that, despite this enormous increase in book figures, practically everyone remains exactly as he was four years ago.
I think everyone has welcomed the Chancellor's concessions to scientific research. The allowances are generous and I think the concession to applied research is the right end at which to start stimulating our scientific research. If you can get industry spending large sums of money on applied research, it will not be long before they realise that they have to have something to apply, and that will stimulate their demand for pure research. I have heard it suggested that these are concessions to profits. That is not true, because in order to get a 10s. concession industry has to spend £1, and that, from a profit-making view, is not a very attractive proposition.
I want, however, to quarrel with the right hon. Gentleman on his concession with regard to depreciation. I certainly disagree strongly with my hon. Friend the Member for North Battersea (Mr. Douglas), who regarded it as a large concession and one which would threaten the interests of the non-industrial taxpayer. This proposal to accelerate the depreciation allowance by giving an additional 20 per cent. in the first year, is really a perfect example of feeding the dog on its own tail. There is no increased concession of depreciation to industry. It is merely an acceleration. That concession might have been very valuable apart from the obsolescence concession, but the fact that the right hon. Gentleman has made a very handsome concession on the granting of obsolescence robs the depreciation allowance of a good deal of its real value. The right hon. Gentleman said,
Two main propositions have been advanced by industry. The first is one to which I do not feel able to accede. It is that


there should be a reduction of Income Tax in respect of any industrial profits that are not distributed but are placed to reserve for the future development and extension of the business. This, in effect, would be giving relief for the act of saving, and that is not, in my judgment, the appropriate approach to this problem." —[OFFICIAL REPORT, 25th April, 1944; col. 672, Vol. 399.]
I am willing to agree that it would be inappropriate to give concessions to savings but I suggest that the right hon. Gentleman should re-examine the question and see whether he could not give concessions, not to savings but to the reserves when they are definitely ploughed back into the business.

The Chancellor of the Exchequer (Sir John Anderson): That is what I am doing.

Mr. Benson: No, the right hon. Gentleman is not doing it, He is merely accelerating the depreciation allowances, which would have been granted in any event.

Sir Herbert Williams: Surely £1 now has a greater value than £1promised in a few years' time. Therefore the date at which you get the concession is of great advantage.

Mr. Wootton-Davies: A bird in the hand is worth two in the bush.

Mr. Benson: It is a matter of opinion. I am not suggesting for a moment that there is no value in the concession. I am suggesting that it is nothing like as great as it appears at first sight. Let us see how it works out. Take a piece of plant which, normally, bears a 10 per cent. depreciation. In the first year, under present conditions, there is a depreciation of 10 per cent.; next year it is approximately 9 per cent., and a year after approximately 8 per cent. Under present conditions, in the first year it will be 30 per cent., next year 7 instead of 9 per cent., and in the third year instead of 8 it will be 6 per cent. It is true that the immediate result, when this concession is brought into operation, will be an increase in depreciation reserves, but industry normally replaces its plant steadily and regularly and the effect will be that in five or six years, although depreciation reserve may be slightly larger, the actual annual allowances in depreciation will have reverted to the original figure.

Mr. Wootton-Davies: But surely in a lesser time.

Mr. Benson: No, the hon. Member is mistaken. The annual allowance in five or six years after this concession is put into operation, will revert very nearly to the existing allowance, for we pay for the initial concession by lower depreciation allowances at a later date. Although it is an advantage, my criticism is that it is not as great an advantage as it appears at first. In view of the very urgent need for industrialisation of the country to a higher pitch, it is inadequate. Last week there was in the "Economist" a very interesting article dealing with the postwar position, suggesting that in the scramble for our resources—not financial but actual resources—between the civil population demanding increased consumption, and the Exchequer having to face the very large bills which are rolling up something might go short, and the probability would be that what went short was the physical resources available for the re-equipment and capital expansion of industry. It is to guard against that that I am primarily concerned. That is why I want the Chancellor to realise that his concession, valuable though it may be, is not necessarily all that industry will require.
I do not regard these concessions as concessions to dividends. They are concessions to industry, and that is a very different thing. If anyone is to be afraid of State concessions to industry at present it should not be we on this side, but hon. Members opposite, who are diehard individualists. I would say to them that when they see the State giving concessions to industry, they should remember the old tag, "Beware of the Greeks when they come bearing gifts"; because every concession which is granted by the community to industry means a weakening of the grip of the individualist private owner on private enterprise. The industrial system is viewed from two different angles according to the side of the House on which one sits. Hon. Gentlemen opposite are still wedded to private enterprise. We on this side believe in Socialism, in the public ownership of industry. We are not going to get the public ownership of industry immediately after the war; I have no illusions as to that; but I do suggest that we are likely to get what one might term an intermediate


stage between private and public ownership, and that that stage will not be so much the transference of actual ownership, as an insistence on the rights of the community that industry shall deliver the goods. It will be a demand that the direction and will of the State shall be paramount and that industrial policy shall no longer be the sole concern of the private individual.
If that is likely to be the state of affairs, the State more and more taking over the direction of industry—I use the word "direction" rather than "control"— we have no need on this side of the House to fear concessions, because they will merely strengthen the power of the community over industry. I would like to instance what I mean. The banks are very largely under the direction of the Chancellor of the Exchequer. The Bank of England has become practically the handmaiden of the Treasury. I think that that is likely to be the pattern of the intermediate stage between private and public enterprise. I regard any concessions made by the community to private enterprise not as concessions to private owners, but as steps to rivet the control of the community on to private owners.

Sir Frank Sanderson: I would like to pay my tribute to my right hon. Friend the Chancellor of the Exchequer. He has, on presenting this his first Budget, not only met the general approval of all sides of the Committee, but the general consensus of opinion in the City of London. I do not think it could have been possible for my right hon. Friend to have paid a greater tribute to the late Sir Kingsley Wood than by accepting Sir Kingsley's Budget as a pattern for his Budget this year. The few remarks I want to make are a criticism, not of what my right hon. Friend said, but rather of what he did not say. Dealing with the question of money policy, my right hon. Friend said:
I hope that this support of our longer loans may go on increasing. As has often been pointed out before, it would be of great advantage to the State after the war if as much as possible of our war borrowings had been for medium and long-term loans, with definite dates of maturity, rather than in forms repayable at short notice and having to be very frequently renewed."—[OFFICIAL REPORT, 25th April, 1944; col. 652, Vol. 399.]
I subscribe to that view wholeheartedly. It has, however, been somewhat of a sur-

prise to me that the Treasury have not adopted principles which would have made it possible to raise money by long-dated rather than short-dated securities. My right hon. Friend will be aware that since last year there has been a depreciation in the value of long-dated securities or securities without any terminal date. Take Consols as an illustration. Last year they were 83; to-day they are quoted at 79¼-½. Take again Local Loans. Last year they were as high as 98⅜, whereas to-day they are 9¼. It is essential that my right hon. Friend should take such methods as are open to him in order to steady the market for the long-dated securities if he is to be in a position to raise long-term money at a rate of interest compatible with that at which he is today raising money on short-term loans. I would have thought that with the credit which is available to my right hon. Friend in many directions in regard to internal credits which he has, and which from time to time require to be invested, he would have been able to use the funds available to him for the purpose of steadying the market for the long-dated securities by judicious purchases. It is, I submit, in that way only that it will be possible for my right hon. Friend in future to raise long-term credits.
I wish to direct my remarks in particular to taxation and its bearing on postwar reconstruction. It has already been said that industry must have the necessary reserves that it needs so that employment can be maintained and even increased and that business can be developed and expanded, and that capital must be available for that purpose. In this respect my right hon. Friend has in his Budget Statement done a good deal in the way of industrial re-equipment by the special allowance of 20 per cent. depreciation which he has proposed to consider. He has also made special provision for research expenditure, the result of which I am sure will be far-reaching. Industry will be grateful for what my right hon. Friend has done in this regard.
It is to the Excess Profits Tax that I wish to direct my remarks in particular. I am not one of those who subscribe to the view that my right hon. Friend should have given more information in regard to the credits which are accumulating, that is the 20 per cent. deductions, because I am not unmindful of the fact that the


Excess Profits Tax to-day is not a one-way traffic. Many hon. Members and the general public appear to be under the impression that the Excess Profits Tax is a one-way traffic only which flows into the coffers of the Exchequer. Those of us who are actively engaged in industry know that one year my right hon. Friend receives an amount from a particular industry and that the following year the same industry receives from the Treasury a return amount, when profits have fallen below the Excess Profits Tax standard, in order to equalise the two years. Therefore, no industry really knows from year to year what amount they will have paid in Excess Profits Tax in the aggregate until the tax comes to an end.
I recall the incidence of the Excess Profits Tax in the last war, and I know that even to-day, a quarter of a century later, there still remain accounts for the tax for the period of the last war which have to be settled. I sometimes think, therefore, that my right hon. Friend will wish to bring the Excess Profits Tax to an end immediately after the war. The Treasury has experience of what occurred after the last war when the short-lived boom was followed by a severe depression, and heavy losses had to be faced on stocks of raw materials in view of the slump in commodity prices resulting in the Inland Revenue having to pay out in deficiency reliefs some £320,000,000. In the first Budget after the last war—in 1919—the Excess Profits Tax was reduced from 80 per cent, to 40 per cent., and in 1920, when it was expected that the tax would disappear, it was increased, to the surprise of many of us, from 40 per cent. to 60 per cent. A good argument could be advanced by my right hon. Friend against the 100 per cent. Excess Profits Tax having been imposed, as it has given industry no chance to accumulate funds for restarting peace-time production, to meet rising costs of raw materials, to replace worn out machinery, and, what to my mind is perhaps even more important, to scrap machinery which has become obsolete through the development of new processes of production, to give more efficient results and to reduce the cost of manufacture.
All this involves capital expenditure which many of our industries will not be able to face save by the raising of new capital. It will be essential that our

great industries should bring their plants up to date, equipped with the most modern machinery if they are to compete in the markets of the world. Many who have made a study of this subject and have great knowledge and experience in these matters would prefer to see E.P.T. remain on some practical and lower basis, at least for a period, let us say of four years, which would cover the period of the Prime Minister's four year post-war plan, and would continue at a declining rate, with its abolition at the end of that period.
I want to direct the attention of the Committee to direct taxation to-day. I do not think that my right hon. Friend should reduce direct taxation at this time. I consider, however, that just as he has laid down his post-war plans in regard to the depreciation of machinery, etc., so, I suggest, to-day is the time when he should consider what is to be the incidence of direct taxation after the war. The- rate of taxation to-day is such that if all incomes over £2,000 net were taken entirely, the Chancellor of the Exchequer would receive only £30,000,000. That is an extraordinary figure, equivalent roughly to less than 6d. in the pound on the Income Tax. It makes me wonder whether we are really wise to pursue indefinitely a policy which will take all the romance out of industry. We only have to look round at our great cities to realise that the great industries in those cities have been built up by the initiative and enterprise of individuals. How easy it would be for me to recall the names of the half-dozen men in my native town who built up its great shipping and other industries. I am loath to believe that those days are past and that we are to make the incidence of taxation so heavy that it will no longer be possible for the creative genius of our people to build up great industries through their strength and vitality in a way which has placed Britain in the position in which she now finds herself, able to meet efficiently the needs of the world's greatest war.
It is hardly necessary to remind my right hon. Friend that taxation has nearly passed saturation point. An increase in the Surtax raises Income Tax and Surtax to 19s. 6d. in the pound which, instead of increasing the flow of money to the Exchequer, does, in fact, decrease it. On


23rd November last year I asked my right hon. Friend a question on this subject, and his reply showed that Surtax produced in 1939–40 £78,920,000, in 1940–41 76,000,000, and in 1942–43 £3,715,000. I observed last year that the predecessor of my right hon. Friend budgeted for £80,000,000 being received from Surtax. In point of fact this was one of the items which failed to bring in the amount budgeted for. The yield was £4,000,000 short. Instead of £80,000,000 it brought in £76,000,000. My right hon. Friend has again budgeted for £80,000,000, but I suggest that he will find that he will not receive the amount of his Budget estimate.
A simple method of bringing home the weight of direct taxation is to take the case of my right hon. Friend himself. Let us suppose that his salary is £6,000 a year. I do not know anything about his financial resources, but let us assume that he has a private income which already puts him on the taxation rate of 19s. 6d. in the £. It amounts to this, that out of his £6,000 a year—[HON. MEMBERS: "It is £5,000 a year"]—but let us assume that it is £6,000—he would be left with only £150 a year. That is the position to-day. All I desire is that the Committee should appreciate the facts.

Mr. Stokes: rose—

Sir F. Sanderson: I am sorry, but I have not much time. I should like to complete this point. If my right hon. Friend received an income of £6,000 a year from a private source, it would require a capital of no less than £5,000,000 invested at three per cent. to bring him a return of '150,000 a year, on which the Income Tax and Surtax would be £142,869, leaving my right hon. Friend with £7,120 a year net.

Mr. Stokes: Miserable.

Sir F. Sanderson: I am expressing my own opinion. It is well that the country should realise what the incidence of direct taxation is to-day.
Now I want to say a word on a question which was raised by my right hon. Friend in his speech, the loss on our overseas investments. This is indeed a very serious matter. The loss of investment income from abroad means a potential loss of imports, which reacts adversely and affects

the standard of living of every man, woman and child in the country. Even the Treasury do not appear to be fully alive to the issue involved. I have personally, on more than one occasion, drawn attention to schemes which have been presented to holders in this country of foreign bonds, which have meant the writing down of what is in fact a national asset. In one case I have in mind no less than 8o per cent. of the asset was written down. This applies particularly to South American countries, whose failure to meet in full their debt obligations is difficult to understand, where credits have accrued to many of these countries, due to the purchases made both by this country and the United States, and which have been increased by a limitation of imports, which should therefore provide them with ample foreign exchange resources to meet all their commitments. The majority of countries in Central and South America have adequate sterling or dollars with which to meet their obligations if they were disposed to do so. I cannot help but feel that the time has arrived when the Government should take a keener active interest in conserving these national resources, since, as I have said, it is the nation as a whole that benefits from the imports by which the interest from these investments is met. This loss of our investments overseas is a serious factor. Britain has had to sell during the war over £1,000,000,000 worth of securities and other assets abroad. She has incurred liabilities to the amount of at least £2,000,000,000 to South America, South Africa, the Argentine, India and other countries. Before the war she was in a creditor position to the rest of the world to an extent of not less than £3,500,000,000, whereas to-day that sum must have been reduced by at least £2,500,000,000.
In closing I wish to make a suggestion to the Committee, and indeed the country, in regard to many who in my humble opinion have very unfortunately expressed very pessimistic views in regard to our peace-time prospects, views which have been expressed by many holding high office, which I cannot help but think are unwarranted. Speeches have been made unwittingly which could only gladden the hearts of our enemies. They have created the impression that when the war is over Britain, economically, will be in mortal difficulty. There is no justification


whatever for this, and it can only be so if Parliament and our people fail to do their duty. It is quite true that we are faced with the loss of receipts from overseas investments, the destruction of many of our cities by bombing, and the sinking of our ships, but our power to produce and power to export should never be greater, certainly not less than 30 per cent. in excess of what it was at the beginning of the war. The greater part of the cost of the war has been met out of income, not out of capital. There has been increased technical efficiency and new inventions which should add substantially to the country's income after the war. Surely we could afford to strike to-day not a pessimistic but an optimistic note in regard to our future when our resources are free for constructive work.
I think of those dark days of 1940 when our great Prime Minister did not talk about our possible chance of survival. He struck one key, one note only—he spoke of victory, even in our blackest hour. Let us not forget these words spoken by our Prime Minister in August, 1940:
Few would have believed we could survive; none would have believed that we should to-day not only feel stronger but should actually be stronger than we have ever been before.
This will equally apply in the economic field in the post-war period. We have the resources. We have the power. We must have the will too.

Mr. Hugh Lawson: I hope that the Committee will excuse me if I do not follow the eloquence of the hon. Member for Ealing (Sir F. Sanderson). I wish to turn my remarks to the speech which the Chancellor made yesterday, and I am very glad that I can follow the precedent which has been set by so many other hon. Members, by offering him my congratulations, at least on one passage in that speech. He said that he hoped that in future it would become more and more the custom for the Chancellor's Budget speech to be a review of the economic health of the country as a whole. I feel that is a very good suggestion. I hope it will be followed, and if the Chancellor is to review the economic health of the country as a whole he must not only consider the finances which make up the Budget, but must also have at the back of his mind that he has a Budget of manpower, a Budget of the real production of

this country. That is as far as my congratulations go, and I feel I must protest, and indeed utter some condemnation for the considerable space which the Chancellor gave to an attack, as I see it, on the increases of wages which have taken place during this war.
If hon. Members will refer to page 14 of the White Paper they will see set out quite fully the wage distribution of the year 1942–43, and the most significant fact in that table is that between two-thirds and three-quarters of the incomes of the people of this country are under the £250 a year mark. Again, if you apply the increase in the cost of living which has taken place since the war, even on the published figures in the White Paper, which appear to me, from my personal experience of what it costs to live, to be exceedingly low, it will be found that to-day two-thirds of the population are receiving a maximum income which would have bought in 1938 the value of £10s. a week. That is the maximum, the average must be lower than that—something under £3 a week. No one will maintain that that is an excessive standard of living. I deprecate the suggestion that wages have gone up so much that the Chancellor ought to allow costs to go up too. This policy of increasing the cost of living will make nonsense of the increases which are being made in the pensions of certain Government employees, and the Government are taking away with one hand those concessions to the dependants of serving men which they are going to give with the other. The Committee should protest very strongly against this policy.
The hon. Member for North East Leeds (Mr. Craik Henderson) went, in some detail, into his scheme whereby saving could be made attractive, as he said, to the working man. If the Chancellor is thinking of making saving more attractive to those who have the smallest incomes, I would suggest that he should guarantee their savings against ever being submitted to a means test for public assistance, or anything of that sort. So long as there is the fear of a means test for savings in regard to public assistance, people will hesitate to save.

Lieut.-Colonel Sir Walter Smiles: Up to what amount would the hon. Member make these savings free from a means test?

Mr. Lawson: I would say, £3 or £4 a week.

Sir W. Smiles: Would anything above a week be subject to a means test?

Mr. Lawson: I am suggesting that if the Chancellor really wants to encourage manual workers—those with the lowest incomes—to save, he should say that the first £4 a week of income from these savings shall be completely free from any means test in future. Perhaps the hon. and gallant Member does not like it, but I am sure that the proposal would be very attractive.

Sir W. Smiles: Very good; but would the hon. Member subject anything over £4 to a means test?

Mr. Lawson: Certainly. I hope that the hon. and gallant Member is satisfied.

Sir W. Smiles: I am satisfied.

Mr. Lawson: I am very glad that the Chancellor looked largely to the post-war conditions of industry. This is the time, when we are approaching the end of the war, for all of us to look to the future as much as to the present. The hon. Member for Kidderminster (Sir J. Wardlaw-Milne) criticised those people who have suggested that it will be possible, after the war, to spend at the rate of £14,000,000 a day. When the hon. Member was making that criticism, he was staring very hard at this particular bench. I suggest that this idea that the war is being paid for by the future is completely fallacious. The hon. Member tells us that we cannot spend £14,000,000 a day in future because half of that amount is borrowed money. But you cannot use tanks in Italy to-day, which are going to be made in 1965. The only wealth that you can use in this country is the wealth you are creating now. The device of borrowing is only a rather clumsy means of taking money which would otherwise be spent on needless luxuries, from the hands of the people. We are paying for it as we go along. The only way in which the future can be said to be paying for it, is that we are, possibly, allowing capital assets, our roads and so on, to get into a slightly worse condition than otherwise would be the case. The idea that after the war we will not be able to spend at a high rate is something that I do not countenance.
I agree that we cannot have high spending and full production after the war, if industry is to be run on lines such as hon. Members opposite want. The only way in which you can have full production under the present system is to have a bottomless pit for all kinds of consumable goods. You get such a bottomless pit in war-time which you do not get in peace-time with the present system. We shall not have full employment in industry, if industry is run according to the principles of hon. Members opposite; but hope that the British people will not tolerate such a state of affairs, and that they will say, "If we have mobilised for full production in war, we can do the same thing in peace." If the people who now control industry will not do that, the logical thing is to see that others, who will run it on different principles, are given the management of industry. The Chancellor suggested yesterday that if there were to be full production and prosperity in this land after the war, it depended largely on our technicians, our managers, and our workpeople. So long as we have the men, the machines, and the material, there is nothing which can prevent us from having full employment and prosperity.

Mr. Cyril Lloyd: What about the markets?

Mr. Lawson: There are markets in this country for a tremendous amount of both consumer goods and capital goods. We have to rebuild this land. We have markets overseas as well. It does not matter whether we will have to trade with a Socialist State or with a capitalist State; so long as we can produce, there is nothing to stop us from exchanging our production with some other country, for raw materials or goods which they can produce. The only thing that can stop us is inability to do it at a profit. Other hon. Members have referred in some detail to the profit motive in industry, so I feel that I shall not be out of Order in suggesting the way to get rid of the bottleneck of production which is likely to occur after this war. Men, machines and materials should be the only technical considerations that are really needful for full production, but first it is necessary to remove the private profit motive. The need of the State should be the regulator and deciding factor whether production shall take place, and to do this, it is quite


obvious you must have a plan for getting rid of private profit as the regulator of industry.

The Deputy-Chairman: I think that if we go very deeply into the private profit motive, we may be getting out of Order.

Mr. Lawson: I bow to your Ruling, Mr. Williams, but I would suggest that I am in Order in indicating, as other hon. Members have addressed their remarks to the ownership of industry, that, if we are to have full production and employment, it must be on a basis of public ownership of the means of production. That is the point to which I was just coming, and public ownership is the only way in which profit or the regulation of production can be removed.

The Deputy-Chairman: No, I ruled quite definitely that we cannot debate, on this occasion, the question of public ownership of the means of production. This is clearly beyond this Budget. It is not in the Budget.

Mr. Lawson: There is one further point to which I wish to draw attention. An hon. Member opposite referred to the national pool of wealth which this country produces, and which was referred to by the Chancellor when he said that the Budget should be the occasion when the financial and industrial condition of the whole community should be reviewed. I suggest that we should consider, therefore, how this pool of wealth should be created and distributed. I do not want so much to turn the attention of the Committee to how it is going to be created, but I think the distribution of the national income is something that should come within the purview of a Budget speech. I suggest that there are only two considerations which will bear one moment's consideration as to the way in which that distribution of the wealth that this nation can produce should be made. First, there is the need of the individual. Secondly, there is the amount which the individual has contributed towards the common pool. If you distribute your national income on these two considerations alone, I am quite sure you will have a prosperous and happy community, but I suggest that, if you try to distribute the national income in accordance with the ownership of the means of production, you will not have your full production. I am

not going to elaborate this argument, because this is not the time to do so, but I would suggest that my hon. Friends on this side believe in this principle and that hon. Members opposite do not. I know I cannot convince the hon. Members opposite and the only thing left for me to do is to work for their removal from this House.

Lieut.-Commander Gurney Braithwaite: Listening to the hon. Member for Skipton (Mr. H. Lawson) makes one feel how easy of solution all our problems would be if they were only handed over to him. I am quite sure he will now be enlisted to deal, as rapidly as possible, with the grave financial position which has arisen in the Common Wealth Party owing to the defection of two prominent capitalists. When the Chancellor entered the House yesterday for the purpose of delivering his speech, I was irreverent enough to say to an hon. Member sitting next to me, "Here comes the Lord High Executioner, give him a cheer; it is the last chance you will get." An unprecedented scene followed. The spectators witnessed the victim place his head resignedly upon the block, but the headsman, instead of wielding his axe, engaged in a dissertation lasting one and three-quarter hours on the kind of conduct to be observed during the reprieve and hinted at blessings to be enjoyed in the hereafter. The result had a most heartening effect upon the Committee, and on the country as a whole, as showing the Government's determination—and this was the most prominent feature of his speech—to re-establish our export trade by vigorously making preparations here and now.
May I congratulate the Chancellor upon the buoyancy of the revenue? I really think it is remarkable how, year after year, it stands up. I think the wider sweep of the Income Tax has brought its reward, and there is also the success of the apparatus provided by this House for dealing with tax evasion which is now beginning to show concrete results. I think, too, that we might pay a tribute to one often forgotten—the indirect taxpayer, the humble consumer of tea—whom I put at the head of the list for the purpose of record, in the absence of the Noble Lady the Member for Sutton (Viscountess Astor) and of the Liberal Party—and also the consumers of beer and tobacco, so many


of whom, as we were told yesterday, will shortly be leaving our shores, and who have made, during the past 12 months, a huge gift to the Exchequer by their consumption, without placing any problems of repayment, interest or sinking fund upon the shoulders of posterity. The goose, which no longer lays golden eggs but lays paper eggs, is showing amazing toughness in its constitution. It is upon this that our post-war social and economic structure must depend, and I want to ask the Chancellor a definite question about our post-war policy, because I am still in a little doubt about it in spite of his declaration yesterday. Is the Government now committed to an expansionist policy? Recent proceedings in this House, regarding a national health service, education machinery and housing, suggest that it is, to say nothing of the reforms based on the proposals of Sir William Beveridge. Yet every day that the war lasts jeopardises the chance of that policy coming into effect by increasing the cost of servicing Government loans.
At this stage, I wish to insert one question which perhaps the Financial Secretary to the Treasury, who I understand will reply, might be able to answer. When is the post-war credit, or nest egg, to be paid? In homely language, when does the taxpayer touch? Many people are making plans on the assumption that they are going to draw hard cash immediately the fighting ends, in regard to their postwar credits. I believe I am right in saying, that, at the conclusion of the last war, the official termination of hostilities was declared by Order in Council, which said: "The war has now ended." That Order in Council did not appear until 1921. It was approximately three years after the cessation of hostilities. Are we to have a similar procedure? If so, I think the country should know now, because many people are making plans on the assumption that they are going to draw this post-war credit almost immediately the fighting is over.

Mr. Evelyn Walkden: Who are actually basing their future on being able to realise at the share-out? To whom is the hon. and gallant Member referring?

Lieut.-Commander Braithwaite: know of many small Income Tax payers—

Mr. Walkden: Give us an example.

Lieut.-Commander Braithwaite: Myself.

Mr. Walkden: The hon. and gallant Member does not look badly on it, anyway.

Lieut.-Commander Braithwaite: I am not here in this Committee to discuss my appearance or my bank balance, and I do not think I am saying anything untrue when I suggest that there are thousands of small taxpayers wishing to know when this post-war credit is going to be paid. It may be that they are simply planning to go away for a holiday, but many are making plans on the assumption that it is going to be paid. How are the Government going to make this payment? Are they going to make it by increasing the fiduciary issue—for this is a point with which the hon. Member opposite may agree? Surely, there will have to be a great campaign to persuade the public to invest this money if possible, either in Government securities or in the many new issues of industrial capital, which will then be necessary to the tune of many millions, to finance trade recovery and expansion. It will certainly be an embarrassing moment for the Chancellor of the Exchequer if everybody wants to cash in at the moment that the post-war credit becomes available for release. After the war we shall have to return to Budgets which balance, at least approximately, or enter a period of inflation, to which reference has been made by almost every hon. Member who has gone before me to-day, and which must damage national credit and reduce the purchasing value of wages, not to mention the savings of the people. The Chancellor has, rightly, determined to avoid this, and has said so in the plainest possible language. May I quote something which the right hon. Gentleman said in this House as recently as 6th April? He was asked by the hon. Member for Chislehurst (Sir W. Smithers):
Will the Government, so far as it lies in their power, give an undertaking that the purchasing power of the pound sterling to be drawn out, will be the same as that of the pound sterling which these loyal people lent to the Government?
The reply of the Chancellor reads:
I have made it quite clear in a public statement and my right hon. Friend the Prime Minister has done the same that the maintenance of the value of these subscriptions will be a paramount object of policy."—[OFFICIAL REPORT, 6th April, 1944; col. 2160, Vol. 398.]


That is clear enough, and obviously the policy of the Government must be to try to maintain the value of our money as far as they possibly can. But we have also had the less happy declaration of the Secretary of State for War. I gave the right hon. Gentleman notice that I was going to raise the matter, but I do not complain of his absence as I realise that he has plenty to do. It is in his speech when he replied, on 2nd March, to the Debate on Service pay and allowances. The right hon. Gentleman said:
I have made some rough calculations of the cost of the proposal of the hon. Member for Grantham (Mr. Kendall)."—[OFFICIAL REPORT, 2nd March, 1944: col. 1723, Vol. 397.]
Hon. Members will remember that it was for 5s. basic rate and 5s. for a wife—

The Deputy-Chairman: This is where we begin to stray. We had better keep off the matter of wage rates.

Lieut.-Commander Braithwaite: Am I not entitled to remark that the right hon. Gentleman the Secretary of State for War, in winding up that Debate, with the Chancellor adjacent and presumably approving, stated that the sum of £200,000,000 required for that purpose would cause wild inflation? I wanted to refer to that argument.

The Deputy-Chairman: The hon. and gallant Member was in Order as far as he was dealing with it on the lines of finance, but when he appeared to be getting to the position of dealing with individual cases, it would seem that he was making a speech more appropriate to the Army or some other Estimates than to the Budget Statement.

Lieut.-Commander Braithwaite: I will not give the rest of the quotation I intended, but will merely make the reference that the Secretary of State for War remarked that an expenditure of £200,000,000 would cause wild inflation. I want to ask the Government why that particular expenditure was regarded as so disastrous. The Chancellor yesterday told us that, approximately, this sum has, in fact, been expended during the past financial year, in an effort to stabilise food prices. Surely that which was referred to yesterday is, in effect, camouflaged inflation, and the logical conclusion to be drawn from the speech of the Secretary

of State for War was that, if any increase of this kind cannot be averted, there is grossly unfair distribution of the national income as between the fighting man and his confrère in civil employment. I understand that there is a White Paper on the subject—I have not yet had the opportunity of looking at it—which, presumably, contains the Government's second thoughts.

Mr. W. J. Brown: Fifty million pounds.

Lieut.-Commander Braithwaite: The Chair would intervene if I were to comment on that. In the same speech, the Secretary of State for War also referred to the gratuity to be paid to fighting men at the conclusion of hostilities as bearing some relation to the post-war credit or income of the taxpayer. Again I ask, How is that payment to be met? Will it have to be met by increasing the fiduciary issue? I therefore ask for some further enlightenment on Government policy in this connection. I referred just now to expansionist policy, and here I hope I shall carry with me the hon. Member for East Aberdeen (Mr. Boothby). I want to state the position as I see it. Deflation has many theoretical attractions, but we know from bitter experience that it was the primary cause of unemployment following the last war. I hope that deflation will remain in retirement in company with its principal sponsor, Mr. Montagu Norman. But uncontrolled inflation, on the other hand, is an equal evil. It must depress the purchasing power of wages and cause the vicious spiral to which reference was made by the Chancellor yesterday, and which we are all anxious to avoid.
I mention these things because of something which was referred to earlier in the Debate to-day by the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence). He referred very briefly, as I shall, to the Memorandum resulting from the Anglo-American monetary conversations, which was published last week-end. I understand we are to have an opportunity of debating it separately, and so I will not impinge on that subject except to refer to two points of a general character affecting our budgetary policy. I hope that I shall have the hon. Gentleman the Member for East Aberdeen with me when I say I


am not afraid of the Gold Standard as such. He was Parliamentary Private Secretary to the present Prime Minister, who was then the Chancellor of the Exchequer, when he put us back on to the Gold Standard, in 1925. Much criticism was made in after years of the Prime Minister for that action. I have always felt that he was rather harshly dealt with—

Mr. W. J. Brown: The right hon. Gentleman criticised 'himself. Read his speech delivered at Oxford.

Lieut.-Commander Braithwaite: Without going into too much detail, I think I am not putting the case unfairly.

Mr. Brown: I was only pointing out that the Prime Minister admitted subsequently that he was quite wrong in taking the country back to the Gold Standard.

Mr. Boothby: I was not the right hon. Gentleman's Parliamentary Private Secretary when he went back on to the Gold Standard.

Lieut.-Commander Braithwaite: The hon. Member was the right hon. Gentleman's Private Parliamentary Secretary—

Mr. Boothby: Not when we went on to the Gold Standard.

Lieut.-Commander Braithwaite: Not that I think it would make much difference. When the hon. Member for Rugby (Mr. W. J. Brown) tells me that the Prime Minister subsequently expressed a different opinion, there are precedents for that. I only wanted to make the point that the return to the Gold Standard at that time was not a matter of such universal condemnation as it has since seemed Lord Keynes, who is now a Director of the Bank of England, was unkind enough to produce a work entitled "The Economic Consequences of Mr. Churchill." I only hope that when the time comes for the Prime Minister to spend a well-earned retirement, he will not have to write another work on "The Economic Consequences of Lord Keynes as Director of the Bank of England.". Surely, the trouble was not so much the re-introduction of the Gold Standard as the manner in which it operated, and that there resulted a one-way traffic of gold across the Atlantic owing to the

American debt. If there is to be a return to any form of Gold Standard, it must be on the understanding that the metal is going to circulate, as it used to do in the old days of the Gold Standard, and not lie sterilised in the vaults of the American banks.
It seems to me that the country is up against this problem. The United States of America holds the vast majority of the world's gold; Russia is the second greatest gold producer in the world; the Union of South Africa literally lives upon its gold-mining industries. It was obvious that some such proposal would be forthcoming. A pledge has been given that no arrangement will be made without the consent of Parliament, and that is reassuring so far as it goes. I think, however, that we are bound to ask, in what circumstances will the House be asked to approve or disapprove? Shall we be confronted with a fait accomPli and told, "Here is the monetary agreement. The Government regards its acceptance as a question of confidence." I trust not, as an acute constitutional situation might arise if we were so confronted. I confess that what I would like to see is a policy of what I would call "noflation." I invented that word. That is a situation in which the pound finds its level based on sterling currency, and the sterling character of the British people in the post-war world—I think "noflation" is as good a contribution to our vocabulary as "disinvestment"—with carefully controlled inflation, employed in good time, to counter any trade recession.
In the meantime, I think the Committee must address itself to this problem. The Chancellor addressed most of his speech yesterday to our industrial future. I think we have to take a rather different view in addition. It is a very serious responsibility upon us. How can we safeguard our prospects of social security in peace against the huge daily expenditure on war? Only so can the Beveridge Plan become a lifebuoy, rather than a millstone around the necks of our returning warriors. They may find themselves condemned to carry on their backs a rapidly ageing population. "Pennies from Heaven" may be an excellent signature tune for the B.B.C. Red Cross Radio Contest but it will never do as a signature tune for this House of Commons. Our responsibilities lie very heavily in this


direction. What can we do to safeguard the future of our social security policy?
I want to suggest something which has not been said in this Debate yet and which is always unpopular. Will the Chancellor and the Government as a whole, even in this hour of great events, look on both sides of their ledger, particularly the expenditure side? Are we not wasting our resources prodigally and unnecessarily in certain directions? Is all well? I would mention four adverse factors which I do not think hon. Members will question, on whatever benches they may sit. First, how many unjustified millions has the taxpayer had to find as the result of the system known as "Cost plus"? Secondly, surely the theory cannot hold water that wages or pensions must be increased because taxation has been increased. That is merely eating our own tail, for it increases the cost of goods which the Government must buy.

Mr. W. J. Brown: It has not done anything of the kind.

Lieut.-Commander Braithwaite: It is no good the hon. Member sitting there making these gramophone interruptions.

Mr. Brown: Certainly, but if the hon. and gallant Member will allow me to say so, he is discussing as a positive fact something which has not occurred. He is knocking down a bogy which he himself has erected.

Lieut.-Commander Braithwaite: On the contrary, it is within the hon. Member's knowledge that only a year ago we had a request made that old age pensions should be increased to meet the increased Tobacco Duty. I am saying that that policy cannot hold water because it is merely eating our own tails. Many claims for advances have been made by employees of various kinds with the argument that they have to find money for Income Tax now which they have not had to find before. Thirdly, and I hope the hon. Gentleman will not disagree with me—

Mr. Brown: The hon. and gallant Member's chances are not good.

Lieut.-Commander Braithwaite: There is a change in the financial morality of the average man as soon as he begins to work for the Government. I think we are all susceptible to this. There is a

great temptation, when one has an expense sheet in one's pocket, to jump into a taxi quite unnecessarily to cross London when, if we were working for ourselves, we should take the democratic and equally rapid tube. In that direction, all of us have a tendency to worry less about spending Government money than about spending our own. Fourthly, certain questions have been put in this House lately, and my own investigations lead me to believe that they disclose a state of affairs existing in certain parts of the country. At the moment there are certain pockets of unemployment arising here and there. They do not appear in any official returns because the people affected are not dealt with by the employment exchange. The unemployment is inside, instead of outside the factory. When machines are standing, payment is made just as if they were working full time. I am not arguing whether this is a good or a bad system but it is undoubtedly adding to the daily cost of the war.
During the Budget Debate of 1942, I referred to these matters and I made a statement which brought a rebuke—I think it only fair to tell the Financial Secretary, in case he is going to reply—from the right hon. Gentleman's predecessor who is now the Postmaster-General. I made the statement that we were in my opinion spending unnecessarily some £2,000,000 per day. I was asked to produce the necessary evidence. Following that speech, I had letters from civil servants in Departments all over the country, permanent and temporary, saying, "Do come and see our Ministry if you want some support for your case." Now, two years later, I believe that figure to be, if anything, an understatement, but let us take it at £2,000,000 per day, that is £730,000,000 per annum. May I remind hon. Members that in the Budget of 1934, ten years ago, there was a total expenditure of £734,000,000? In reviving this matter I am not attempting to score a debating point; I am putting it forward in the hope of extracting some words of cheer from the Minister who is to reply.
It is still, in my view, the primary duty of the House of Commons to scrutinise expenditure. We have become far too apt to say, "Here are the Estimates of the Departments; let us turn the screw and find the money." We should certainly apply ourselves to a scrutiny of that expen-


diture. I am quite sure that no hon. Member desires to deprive the Government of a single penny necessary to win this war and to win it soon but, while congratulating the Chancellor on his workmanlike and courageous speech, I submit that we are not paying sufficient attention to simple economies which, added together, would reach a formidable figure. Thus all of us are endangering the whole structure of social security, which we hope to build when our nation once more treads the paths of peace.

Mr. Woods: Many tributes are being paid to the lucidity of the Chancellor's Budget speech yesterday. I think everybody who listened to him will quite definitely appreciate the clarity of his statements and the way in which large figures were handled and problems dealt with so that the layman could comprehend the significance of his statement. Like many other hon. Members I reflected on the previous statements of his predecessors, and it was crystal clear to me as I listened that there was one note missing with which his predecessor had familiarised us, that was the human note. His statement yesterday dealt almost exclusively with his concern for industry, and for its being put into working order in the post-war years. That may be quite all right, and I think the Chancellor was justified in dealing seriously with this important problem while we are committed to private enterprise, with all its limitations and uncertainties, but I wish the human side had been stressed, so that the country would have felt that there was genuine appreciation of the burden which is being carried by the population.
More regard than ever before is, rightly, to be paid to the encouragement of research. The Chancellor said there were three stages of research and that if one broke down all would break down. But there is another stage, the preliminary stage, in which young men and women with talent have the opportunity of acquiring the necessary knowledge to fit them to handle the instruments of research, so that they can make a contribution to its problems. Unless you have young men and women able to initiate research then research will never be born. What is the position of these who are having to make sacrifices to send their sons and daughters to the universities? They are offered a paltry allowance, as

though their children were at elementary schools. If the Chancellor had appreciated the human aspect of that problem, and had promised relief to those parents who appreciated their responsibilities by seeing that their children are equipped for vital tasks in the restoration of the country, then he would have made his Budget much more palatable to those who are being asked to bear heavy burdens. Scholarships, in some areas, are at present almost negligible, and the only opportunity many have of going to a university is by their parents' financial assistance. Those who are on fixed incomes, such as ministers of religion, will have to forgo the duty to their children which they would have liked to perform. A small concession, designed to cover a contribution towards educational endowments and expenses of university courses, would have been welcomed.
I think many people will be alarmed at the fact that the rein on the cost of living is to be slackened, so that it goes up to about 35 per cent. It is all very well to say that because wages have gone up we can allow the cost of living to go up. The Chancellor referred to the grand old Victorian virtue of thrift. There are many people who have attained a degree of independence on their £3, £4, £5 or £6 a week, and who have no possibility of adjusting it. Many are rendering substantial voluntary service to the war effort, and if the Chancellor had been able to help them through the assessment of their Income Tax it would have been a recognition of the contribution they are making and the hardship which the adjustment of the cost of living basis will cause them.
There is to be some adjustment of the Purchase Tax. Since this tax was first initiated, certain things which are definitely necessary have been removed from its operation. The technique of Sir Kingsley Wood was to make a small concession each year. The only substantial thing that remains is crockery. I cannot conceive of anybody purchasing the present utility crockery unless compelled to do so, or using it unless there was no alternative. It is a scandal that this sort of crockery should still remain subject to the Purchase Tax. There is also to be some adjustment in the collection of E.P.T., and some concession to 30,000 business people. There is one anomaly which I think should be reviewed, and that


is that old businesses which are on the capital assessment are on the basis of 6 per cent. while new businesses are on the basis of 8 per cent. I think an average of 7 per cent. should be struck or the lower figure increased to 8 per cent.

Mr. Boothby: I would like to make a brief reference to the speech of my hon. and gallant Friend the Member for Holderness (Lieut.-Commander Braithwaite) and to say how much I agree with him when he pointed out, at the conclusion of his remarks, that it was the duty of this' House to scrutinise expenditure very closely. I am sure he will agree with me that such scrutiny is by no means incompatible with a general policy of expansion. Indeed, a careful scrutiny of the actual details of expenditure, by this House, is an essential condition of a policy of expansion. My hon. and gallant Friend accused me, by implication, of facilitating the return of this country to the Gold Standard in 1925; but I hasten to assure him that I was one of four Members who opposed this action in debate in this House. There are limits to the burdens I can bring myself to bear. I do not know whether I should have been able to influence policy if I had been Parliamentary Private Secretary to the Chancellor at that time; but at least I can claim that I was not. As my hon. and gallant Friend said, the then Chancellor, the present Prime Minister, lived to rue his action and to regret that he had done it.
I have only one other reference to make to my hon. and gallant Friend's speech, and that was when he referred to what the Secretary of State for War said about the effects of an increase of pay and allowances to the Services. When the Secretary of State said that an additional expenditure of the order of £200,000,000 a year would produce a wild inflation, he was talking the most utter nonsense; and, as he has since been vehemently repudiated by every economist of repute in this country, we need not bother very much about that.
With regard to the Budget itself, the greatest tribute that the Chancellor could have paid to his predecessor was to repeat, practically without substantial alteration, his financial proposals of last

year. It shows more clearly than anything else how well founded and well considered those proposals were. I was glad also to hear the Chancellor pay a tribute to another innovation of Sir Kingsley Wood, namely, the White Paper on national income and expenditure. That will have repercussions of profound importance in the years that lie ahead. It is of immense significance, so important that I am going to quote my right hon. Friend's words yesterday. He said:
For the purpose of a policy of full employment it will be necessary, year by year, to bring under review the income and expenditure not only of the Exchequer, but of the country as a whole, and not only its income but its capital expenditure and its savings."—[OFFICIAL REPORT, 25th April, 1944; col. 653, Vol. 399.]
This is a clear recognition on the part of the Chancellor of the Exchequer of the fact that the modern Budget is a great instrument of economic policy, and that it should therefore give effect not merely to a short-term but also to a long-term prograrmne.
The cause of the breakdown of our economic system, in so far as it broke down between the two world wars, is now generally admitted on both sides. It was the failure of distribution. It was not the failure of production or of productive capacity. It was simply that the power to consume all over the world failed to keep pace with the power to produce. The lesson that I hope we have all learnt is that in future distribution must no longer be subordinated entirely to production for profit, but must also be related to human needs; and that in time of peace the productivity of the modern world must be balanced with adequate purchasing power. We know now that production can only be maintained through the expenditure of incomes previously earned. The key-note of prosperity is expansion; and, from an economic point of view, contraction, such as was deliberately imposed over a large part of the globe between 1930 and 1940, is death.
We have solved our economic problem during the war because the Government have decided that certain things had to be produced, and have seen to it that money has been available to purchase them up to the limit of our productive capacity; and we shall solve our economic problems after the war if, but only if, the people


and the Government of this country decide that the social objectives of peace are of equal importance to the military objectives of war. In other words, that full employment, adequate food, housing and clothing, and light, heat and water for the masses of the people, are of equally vital importance as victory. If we decide that, we can get all these things, just as we are going to get victory. In time of war, thrift on the part of the individual is essential, and I am sure the Committee was well satisfied with the figures of consumption given yesterday. Not the least satisfactory part of the Budget statement was that consumption had actually gone down during the past 12 months. In time of peace thrift is often socially desirable; but when depression threatens, mass hoarding, as Lord Home used frequently to point out, may be fatal to recovery. It has been so in the past, and it might be so again. This Budget is in essence a preparation for post-war policy; and the price of giving to the individual the right to save what he wants, and to the extent that he wishes, is that the State must have the power to ensure that the aggregate savings of the community are offset by a total expenditure sufficient to absorb the available factors of production. Otherwise we shall not achieve full employment in the years that follow the war.
The Chancellor said that the loss of export trade was the main cause of the long continued unemployment in our depressed areas before the war. Strictly that statement is true; but I maintain that it need not have been so, if we had pursued a sane instead of an insane economic policy. It would not have been so if we had not allowed our policies and our lives to be dominated by an abstract economic theory which, in the conditions of the 10th century, has ceased to have validity. Trade is of course a vital topic, which is related to the Budget, but can perhaps be better discussed when we consider the currency proposals of the experts. Nevertheless, I think it would now be generally agreed that the object of trade should not be the piling up of export surpluses, which get a number of countries into unpayable debt and sooner or later freeze up the economy of the entire world. The object of trade should be the mutually advantageous exchange of goods between countries. In other words, our object must be to get goods into this country and not out of it; whereas the main object-

tive of the Governments both of the United States and of this country during the years between the wars was to get goods out of their respective countries at almost any cost, in an attempt to export their own unemployment.
This was the beggar-my-neighbour policy referred to by the hon. Member for Birkenhead, East (Mr. Graham White), which in the long run does not affect the total volume of world employment, and does not do any good to any one. Incidentally, the beggar-my-neighbour policy is implicit in the policy of free imports, free trade, and laissez-faire. It is part of that game. But, as the hon. Member is not here, I will not argue the point. Our object as far as international trade is concerned after the war must be to get into the country the raw materials and the food that we require to maintain, and as far as possible and practicable increase, our standard of living. It is not, and should not be, to give goods away to people all over the world, in order to pile up an export surplus which in the long run cannot do us or anyone else any good.

Sir G. Gibson: How will my hon. Friend meet these imports unless he exports?

Mr. Boothby: It is of course essential that we should export; but trade should be the mutually advantageous exchange of goods, and we should never again devote all our efforts to trying to export more goods than we import.
The picture that the Chancellor painted yesterday was a little too sombre for my taste. I am all for due caution, but I think we have grounds for great hope. After this war we shall no longer be the great creditor nation in the world. I often wonder whether that will not prove in the long run to be an advantage rather than a disadvantage. Certainly a good many heavy responsibilities and heavy losses will he removed from our shoulders on that account, because if we added up all the money that the people of this country have lost by reason of our being for 70 years the world's greatest creditor nation, it would total up to a tidy sum. I do not know whether it has ever been computed. We shall enjoy many advantages and assets, both political and economic, when this war is over. It is most important—and here I would like


to take up a point made by the hon. Member for Kidderminster (Sir J. Wardlaw-Milne) in his interesting speech—to distinguish between external and internal debt. We have enormously increased our internal debt during the war, and we shall have to find ways and means of dealing with it; but that we can do so admits of no doubt.
In all the circumstances the increase of our external debt is remarkably small, considering what we have had to do. It has been caused mainly because, owing to the war, we have been prevented from exporting anything. That really is the origin of Lend-Lease. A lot of people have got into the frame of mind that we are now utterly dependent on foreign supplies being given to us. That is not the case. The reason for Lend-Lease is that, owing to the war conditions, we cannot possibly export. But that reason will not apply when the war is over. We shall then have to export again—and there is no reason why we should not export in very large quantities—in order to pay our way. It is a false assumption to suppose that unless Lend-Lease is continued indefinitely we shall have to lower our standard of living. We have received, but we have also given; and the reason why we cannot at present pay for what we have received is the war, and nothing but the war, which has prevented us from exporting.

Mr. Molson: We have also been prevented from exporting by the restrictive conditions on which Lend-Lease is given.

Mr. Boothby: I agree, and that is a valuable additional point which reinforces my argument. With regard to the internal debt, I think it is true to say that the taxpayers and the lenders of money are to a large extent the same people, and to that extent I do not dissent from the view of the hon. Member for Chesterfield (Mr. Benson) that our internal debt amounts to a bookkeeping transaction. What is absolutely true is that the internal debt does not in any way diminish the national income, the real wealth of the country. After the war we can reasonably expect to increase that national income by means of a greatly increased national production.
Take, for example, agriculture. I am one of those who believe that there is no reason why our production of food in this country should not be increased by £200,000,000 worth a year, in comparison with pre-war. We want to grow, and we can grow, in this country those protective foods which every scientist assures us are essential for the health of any community. I think that the Chancellor is right, on the whole, to raise the cost of living index by 5 per cent. That is a reasonable proposition, and I do not agree with some of my hon. Friends behind me who complain about it. But the principle of price control for essential foodstuffs such as bread, milk and meat has been applied with brilliant success, and it should be retained as a permanent feature of our national economy after the war. Nobody suggests that we should retain subsidies at the present level. I remember that in 1940 the total amount we paid out at the Ministry of Food was of the order of £60,000,000. It has risen a great deal since then. But it certainly met the case at that time; and I think we can reasonably expect to go back to what I call a consumers' subsidy for essential foodstuffs of that order after the war. I therefore hope that the principle of price control will not be hastily abandoned when the war is over.

Mr. Kirkwood: Do I understand the hon. Gentleman to say that he believes it possible for our country to produce all the necessary foodstuffs with further subsidies?

Mr. Boothby: No; I suggested that we could produce about £200,000,000 worth more. We shall, of course, still require to import some food. But we could to that extent increase the real wealth of this country. Perhaps our greatest advantage will be our own internal market, which to many countries will be indispensable. I suggest that in the final analysis, the volume of our trade will be determined by the productive capacity and the purchasing power of the people of this country. And if that be true, I do not think we have very much to fear.
So far as industry after the war is concerned, the development of new industries, the modernisation of plant, and re-equipment, will be of vital importance. That is why I think the Committee so heartily welcomes the proposals of the Chancellor,


with regard both to expenditure on new plant, machinery and buildings, and not least to expenditure on research, upon which we may have to depend a great deal. At the same time, I think we will have to face the fact, as one or two hon. Members have stressed, that capital expenditure after the war, both by industry and the Government, will have to be considerable, if we are to put this country into really good order and if we are to make our indutsries well found. Capital expenditure will have to be considerable on the land, on water supplies, electricity, drainage and so forth; and also in the whole field of rebuilding, re-equipment, new plant, etc. Sooner or later the Excess Profits Tax, and the Purchase Tax, will have to be entirely recast in order to facilitate this.
There is one other point which I would like my right hon. Friend to consider. Something will have to be done—it is related to the whole problem of reconstruction—about the location of industry. That was one of the main causes of the stagnant pools of unemployment which were left about the country in between the wars. It is far better to take industry to labour than order labour to go to industry. Something in any case must be done to stop the fantastic growth of London if we are to achieve a balanced national economy. I would like to support the view of my hon. Friend the Member for Walsall (Sir G. Schuster) that the Government should now undertake a comprehensive study of the structure of British industry, so as to be ready with their plans as soon as the war comes to an end.
Finally I hope that my right hon. Friend will give serious consideration to the advisability of separating capital from current expenditure after the war. I believe that the latter should be covered out of revenue. If we are to find the capital which will be necessary for the re-equipment and reconstruction of this country, it should be found out of the taxation of capital, such as Death Duties, and the floating of loans against capital assets; and it should be a long-term job and not an annual job. Otherwise, I do not believe that we shall ever succeed in doing it. A State cannot go bankrupt so long as it is able to obtain from the real wealth of its own citizens, either by taxation or borrowing or both, the necessary

resources to finance its activities. The Chancellor admitted that in his Budget speech yesterday, just as his predecessor admitted it in more than one Budget speech. What matters is the national income. And this rises at full employment to a level at which a programme of continuous expansion can be financed.
The Budget is no longer concerned merely with Exchequer revenues and expenditure; it must be designed in the future to ensure that total outlay is sufficient to absorb our available factors of production, including man-power. In other words, it must be designed to produce effective demand.
Surely, after the bitter experience of the 20 years between the two world wars, we have learned by this time that real wealth consists of goods and services produced by man-power, and that money has not a separate independent value of its own. Money is no more than a convenient method of measuring the value of goods and services, and of facilitating their exchange. If once again we try to set up money as an independent, invariable pivot of the whole national economy, around which everything else must revolve, then, once again, we shall come to grief, as we did between the two world wars. Our strength and hope for the future lies in the fact that everything depends upon our production of real wealth, the production of goods and services; and that neither gold nor paper notes are of value except in so far as they represent that real wealth.
I agree entirely with my right hon. Friend that sterling is of vital importance to this country, and must command the confidence of the world. It will do so so long as it represents the productive capacity of this country, the real productive capacity. It will not—and I now trespass upon another field—necessarily do so if it is tied to gold. That is, however, another issue, with which we shall deal later on. I am sorry to have delayed the Committee for so long; but I have always believed with passion, and I believe it no less to-day—and all the events that have taken place in the last 20 years have done nothing except confirm my belief—that so long as human needs remain unsatisfied, the fundamental solution of our economic problem is to be found in clothing those human needs with the means of purchasing the abundance which


modern science has placed at our disposal. I believe that the answer to the economic problem is to be found not in artificially contracting the productive capacity of this or any other country in the world, but is rather to be found in giving to the mass of the people who want goods the facilities and the means of buying them. Our problem therefore is fundamentally a problem of distribution rather than of production.

The Financial Secretary to the Treasury (Mr. Assheton): It is clear that there has been general approval on all sides of the Committee of the main proposals put before Parliament by my right hon. Friend. From what I was able to read in the Press this morning, there too there has been general approval. I should like to thank hon. Members for what they have said in the course of the Debate yesterday and to-day. My right hon. Friend will wind up the Debate to-morrow, when he will deal with a number of matters of great importance. He will deal in particular with matters which were raised first by my right hon. Friend the Member for East Edinburgh (Mr. PethickLawrence) to-day, and which have been referred to by more than one hon. Member since.
In his contribution to the Debate the hon. Member for Leigh (Mr. Tinker) asked for an explanation of the Government's stabilisation policy, and, in particular, whether subsidies were to be cut down in order to allow the cost of living to rise. My right hon. Friend will be making a further reference to this matter when he comes to reply to-morrow, and he will deal particularly with the point as it was put by my right hon. Friend the Member for East Edinburgh and by the hon. Member for East Birkenhead (Mr. G. White). In the meantime, however, I can give the hon. Member for Leigh some explanation of how the stabilisation policy has worked hitherto, and can explain what change is involved in the announcement made yesterday by my right hon. Friend.
I know that the Committee will appreciate that if the cost of living index is to be kept constant at any particular figure, increases in the prices of particular commodities which enter into that index must be counterbalanced by reductions in the

prices of other commodities. I think that is clear. I think the Committee know what has been done in the past. The necessary reductions have been achieved by additional subsidies to reduce the selling prices of other commodities. What the announcement yesterday of my right hon. Friend meant was that, to a limited extent, we must in future expect that the prices of some items in the index will increase without reductions being made in prices elsewhere; but it would not therefore be correct to say that the amount of subsidy at present being borne by the Exchequer is to be cut down. As my right hon. Friend showed, the cost of subsidies has been increasing. What the new arrangement means is that the cost in future will not rise by so much as it would have done if the change now proposed were not made. To-morrow my right hon. Friend will deal more fully with the principles underlying that situation, but I thought it might be useful to the Committee if I gave the explanation asked for by the hon. Member for Leigh.
There are a number of smaller points with which I will try first to deal, and then I will try to gather up some of the more general comments made in the course of the Debate. My hon. Friend the Member for Holborn (Sir R. Tasker) made some criticisms in his speech. He raised the question of the small man not being able to face the cost of legal proceedings, and therefore having to bow to the rulings of the Inland Revenue Department. The issues which arise between the small man and the Inland Revenue Department nearly always relate to Income Tax. Where a difference arises there is an appellate tribunal in the local Commissioners of Income Tax. The small taxpayer can get his case decided there without any cost, and the decision of the Commissioners on appeal is subject to the right of the dissatisfied party to demand that a case shall be stated for the High Court on a question of law.
It is very rare for the Inland Revenue Department to demand a case for the High Court where a decision in respect of personal allowances has been given in favour of a small taxpayer. It is done only when some important question of principle is at stake. In fact, there have been only four such appeals to the High Court by the Inland Revenue Department since 1933, and in all of the four cases


the revenue won but did not ask for costs against the taxpayer. My hon. Friend also had in mind valuations for Estate Duty. Here again of course, where a higher value is placed upon a property by the Valuation Department or by the Board of Inland Revenue than is placed upon it by the executors, it is open to the executors to lodge an appeal to a Referee within 30 days.
Finally, my hon. Friend the Member for Holborn made some criticisms of a Sub-section of a Section of the Finance Act of 1894. I have not yet had time to examine that Sub-section closely, but I do not expect it will be very surprising if I find something which I do not like, because I was brought up to believe that the Finance Act of 1894 was one of the worst Acts ever passed by Parliament.

Mr. John Wilmot: Are the figures of appeals which the Minister has given confined to questions of personal allowance?

Mr. Assheton: Yes, Sir. I am afraid I have not got any other figures with me, at so short notice. My hon. Friend the Member for East Willesden (Mr. Hammersley) raised a question about the £1,000 increase proposed in the Budget speech, and he wondered whether a trader would remain tied to the profits standard, even if the other standard, as increased by. £1,000, would be higher than the profits standard. What he really asked was what options would the taxpayer have. The answer is that the taxpayer will not be tied; he can take whichever standard is the better. If the alternative standard, as increased by £1,000, is higher than the profits standard which he at present enjoys, he can elect from 1st April for the alternative standard, as increased. I think that the Committee will recognise that that is very reasonable.

Mr. Kirkwood: Does that mean that where formerly the profit could be only, say, £1,500 it can now be increased to £2,500?

Mr. Asshetont: That is the position, including, of course, the remuneration of the proprietors of the business. The hon. and gallant Member for Ormskirk (Commander King-Hall), in one of his thoughtful speeches, made a suggestion that we should do something more to educate the taxpayers and people of this country on

more popular lines. Of course, the speech which my right hon. Friend the Chancellor of the Exchequer made yesterday, and the speeches which Chancellors make on Budget Day, are the principal means of seeking to educate the public with regard to our financial affairs. In addition to that we have this extraordinarily useful White Paper which accompanies the Budget Financial Statement which does give an enormous amount of information to hon. Members in this House and also to people outside. But I do recognise that that document is not what the right hon. Gentleman the Member for East Edinburgh described to-day as the "breezy little manual," and that if we are to have something which is rather more popular, it will have to be designed in a different way and in a somewhat different style. All I can tell the hon. and gallant Member for Ormskirk, is that his proposal will be considered, and if it is possible to make any suggestion to meet it, I will take an opportunity of having a word with him at some time in the future. I do not make any promises.
I should like to thank the hon. Member for Harwich (Mr. Holmes) and other hon. Members who have congratulated the Board of Inland Revenue on the success of their Pay-as-you-earn system of collecting taxation. I think it is only right that the Committee should pay these tributes to a piece of work which both employers and workers recognise as being extraordinarily good. My hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne) raised a number of important points, and some of these will be dealt with by the Chancellor tomorrow when he comes to discuss again this question of wages and prices and so on. My hon. Friend also talked about motor car taxation, and that is a matter which the Chancellor hopes to deal with to some extent in his winding up speech to-morrow.
My hon. Friend the Member for Duddeston (Sir O. Simmonds) made a useful contribution, and gave some interesting figures with regard to the Excess Profit Tax and how it affects medium businesses. These figures will, of course, be carefully studied by the Department. The hon. Member for North-East Leeds (Mr. Craik Henderson) made a proposal for an alternative form of loan which


should, he thought, appeal to the working man and especially those who are not accustomed to paying Income Tax. He suggested some form or other of premium bonds. My right hon. Friend the Chancellor does not feel that anything has happened so far to show that the well tried method of finance should be discarded. I think one ought not to overlook the fact that there would be a sharp difference of opinion over a proposal of that kind among those very many voluntary workers who help us so greatly in our War Savings effort. It would be highly controversial. The hon. and gallant Member for West Woolwich (Major Beech), who made a maiden speech to-day, naturally found a very ready response when he referred to the late Sir Kingsley Wood, whom he has succeeded as Member of Parliament for that Division. All that he said, I need hardly say, was very welcome to me. The hon. Member for Ealing (Sir F. Sanderson) made a valuable contribution,. as he always does, and pointed out how extraordinarily high taxation was in the case of the highest incomes, and pointed out what has been pointed out in this Chamber before now, how little there is left for those in the highest range of Surtax payers.
I think that Members of the Committee all appreciate and realise that we are now on the eve of enterprises which will represent one of the most intense military efforts, or the most intense military effort, of the war. We still have that before us and certainly we have not reached the stage at which we can take for granted an early ending. On the other hand, we have now virtually completed the long drawn-out process of mobilising our economic resources so as to make possible the most intense and indeed, if need be, the most sustained military effort. The stage has been reached at which it is both legitimate and prudent in the financial sphere to make preparations for the problems of the future.
I should like, if I may, for a few minutes, to look into that future beyond the period immediately after the end of the war, and to begin by referring to a question which has been causing some concern to various hon. Members, and to which reference was made, not only by the hon. Member for Kidderminster, but also by my hon. Friend the Member for Chislehurst (Sir W. Smithers) in his excel-

lent speech yesterday. It was also referred to by the hon. Member for Skipton (Mr. H. Lawson). The question which is being asked is: If the Government can spend £14,000,000 or £5,000,000 a day during the war, why cannot we spend the same on more constructive objects in peace time? It was suggested by more than one hon. Member that that question is being asked and needs answering. I think everyone is familiar with the fact that the huge war expenditure of the Government has two aspects. It has the physical aspect and the financial aspect. The physical counterpart of the question which is being asked is really this: how are we able to carry on and maintain a tolerable standard of life when we are diverting so large a part of our labour and other resources to making armaments and to the Fighting Services. There is the financial counterpart of the same question. The physical aspect, of course, as my hon. Friend the Member for East Aberdeen (Mr. Boothby) pointed out, is a matter of man-power and materials and also of shipping—man-power to provide the Fighting Services and the workers in the munition factories and the Civil Defence workers and those services which the community cannot do without; materials for clothing, equipment, aircraft, weapons, ships—ships to fight and ships to bring our imports of food and raw materials and other necessary needs.
The great physical contribution in these years has been achieved in four ways. First, by much more strenuous work, in which women, in particular, have played a most notable part, and by hours of work much longer than are normally acceptable. Secondly, by curtailing less essential consumption of all sorts. Thirdly, by living on capital at home, in various ways which I will try to elaborate in a few minutes. Fourthly, by realising our foreign investments to provide food and materials, in addition to those very large quantities which we are receiving under Lend-Lease. It is not necessary for me to enlarge on the question of harder work and longer hours; we are all familiar with that from our own experience throughout the country, and the population as a whole is well familiar with it. On the second point, that of curtailing the less essential types of civilian consumption, it is obvious that the great war effort could not have been carried on if manpower, materials, and shipping had con-


tinued to be made available for those ordinary civilian needs which we were accustomed to satisfy in peace-time.
It is clear that labour and materials have been diverted from civilian requirements to war purposes. We have not merely gone without current consumption goods and services, but we have eaten into our national capital: in the first place, stocks of all sorts, which were accumulated for peace-time needs, have been drawn upon for the war; in the second place, during the war we have suspended civilian building almost entirely, and have perforce neglected the repair and decoration of our houses and, similarly, the renewal of much of our domestic equipment, our motor buses, motor cars, railway rolling stock, plant and machinery. All this replacement has been neglected for five years so that we could use all our resources to win the war. Incidentally, this war has drawn our attention very clearly to the fact that in far too many of our industries our capital equipment is sadly behind that of the United States of America and the standards which we must attain if we are to rebuild the export trade which is so essential to us. That is a deficiency which we have to repair, and my right hon. Friend the Chancellor of the Exchequer made it clear that that was the governing purpose of some of the arrangements which he foreshadowed in regard to the future of taxation on industry and on agriculture.
A moment's reflection will show that the country would not, and could not, resort to such expedients as we have had to resort to during the war, to support Government expenditure of a similar nature in peace-time. That brings me to the financial side of the picture. Finance is but one of the two sides from which we can examine the realities of the situation, whether it is the finance of business or of the nation itself. It is not surprising to all of us that on the financial side the picture is very similar. We have been able to spend £14,000,000 or £15,000,000 a day during the war because we have been willing to work harder, to restrict consumption, and to accept the rigorous control of our personal habits and economic conditions, and because we have been able to secure many imports without paying for them by exports. We have denied ourselves a great deal of the expenditure that we

made in peace-time. By taxation, which is compulsory, and by saving, which is voluntary, we have given up a great deal of our purchasing power, so that the Government might spend it on the war. If we have capital to invest, the Capital Issues Control keeps to the minimum any new issues which might compete for that money with war loans. Many hon. Members know what that means. Remarkable as the effort of the country has been in paying taxes, our National Debt is now increasing inexorably and rapidly. It is to-day very close upon £20,000,000,000. One hon. Member said yesterday that it is very difficult to understand what that means, and, to help the Committee, he reduced it to the number of pounds per head of the population. I would like to remind the Committee that after the war the service of that debt will make a very big draft on the proceeds of taxation.
Again, many of the goods and materials which we have been importing during the war have been paid for by realising our foreign investments. We started the war with some thousands of millions of pounds invested overseas. The interest on those investments, built up, as more than one hon. Member has pointed out, by previous generations, flowed into this country in the form of food and materials, for which we had already paid years before. To-day many of these investments have gone, and the capital has, been spent in paying for the war. We shall no longer have vast quantities of food and raw materials coming into this country which we do not have to pay for by current exports. I believe that the country as a whole is beginning to realise that, but it cannot be said too often, because many people have never thought about these things. Although here we are quite accustomed to thinking about such things and to debating them, in the country in general such matters are not fully discussed and understood. The more Members can do in their constituencies to help in the understanding of this problem, the greater the contribution they will be making to a sound financial situation in this country.
Yet again, quite apart from the supplies which we have received under Lend-Lease arrangements from the United States and the generous help given to us by Canada, which the hon. Member for Kidderminster and my right hon. Friend


the Member for East Edinburgh and others have referred to, we have obtained from some countries supplies which we have paid for in sterling. Our suppliers have left that sterling here. One day they will want to take it away in goods and in services. That means that a proportion of our production after the war cannot be consumed by ourselves, but will have to be devoted to meeting our obligations; and this again is a point which gives one much to think about. So we have been not only living on capital, but we have been piling up liabilities to be discharged in the future. On the financial side, therefore, as on the physical side, our huge war expenditure requires measures some of which in peace time would not be thinkable at all. By the way, in referring to these sterling balances there is one point which I cannot refrain from mentioning. When I read the almost eulogistic references which some people make to exchange depreciation, I wonder whether those who suggest this expedient have stopped to think that it is in return for a growing balance of sterling that we have not only obtained these supplies during the war but hope also to obtain them in the early post-war years.
I recognise that there are few responsible and informed people who would seriously attempt to argue that the Government should spend in peace time on anything like the same scale that we have been spending in war. Nevertheless, some of the considerations which I have mentioned to-day point the way to the judgments which we shall all have to make in deciding how far and how fast we can safely give effect to the very extensive plans which are being canvassed on all sides for the improvement and development of our national life. I have no particular policy or programme in mind. I am thinking of the attitude we should adopt to our post-war problems and plans generally.
if our national economy is to remain sound and healthy, and the vicious circle of inflation of prices and values avoided—and judging by past experience the practical danger of inflation seems to be greatest when the fighting has ended—let us ask ourselves one or two questions. First, on the physical side, can we be sure that the competition for labour and materials can satisfy, at one and the same time, current consumption on the scale

that we should like to have it and the improvement, as well as maintenance, of our capital goods and the capital equipment of our industries, and also all these plans for national development, without causing scarcity values for the labour and the materials available? And if there is a danger of such results will the country recognise the imperative need of keeping its equipment up-to-date, and be prepared to choose, for a time, between the standard of current consumption which it would otherwise desire to have and the plans for new developments placed before it?

Mr. Gallaeher: Is it not the case that we shall have, as soon as the war is over, 4,000,000 or 5,000,000 who are at present not producing anything ready to go into production and that that makes all the difference?

Mr. Assheton: My hon. Friend will be able to develop his argument to-morrow. I hope he will allow me to finish mine. In an interesting leading article which I have just read in the current number of "The Economist," the writer reminds us of a principle sometimes neglected which I have been trying to put to the Committee to-day. It is that "if the physical resources are not adequate to do everything at once, no financial contrivances can make them so." That is the point we have to bear in mind.
On the financial side, too, we shall have to ask ourselves some questions. Will the capital required for such plans, when added to the existing demands on the market from Government, industrial and other sources, cause such competition for the capital available as to jeopardize the level of interest rates which we all look to see maintained for the general benefit of the community? Again, will the current cost of central Government and local government, including all additional borrowings, involve such a burden on taxation, direct and indirect, as will prove insufferable to individuals, whether with large or small incomes, and prove a serious deterrent to business enterprise?
With such questions I think we must leave the matter for the present. This is not the occasion to anticipate discussion of particular policies. But I should like to point out to the Committee that these questions will have to be faced when the time comes and the answers will have


to be weighed against the merits of every proposal, however desirable it may be in itself. I think the Committee will agree that the Chancellor's Budget speech will have been a landmark in our financial history, and that, though he gave us some much needed warnings about the future and about our behaviour in the future, he showed throughout the whole statement, as "The Times" said in a leading article to-day,
A humane and constructive spirit which lends conviction to his balanced confidence in the future,

Ordered:
That the Chairman do report Progress, and ask leave to sit again."—[Mr. A. S. L. Young.]

Committee report Progress; to sit again this day.

WAYS AND MEANS

Considered in Committee.

[Major MILNER in the Chair.]

NATIONAL LOANS

Resolved:
That the power of the Treasury to raise money under section one of the National Loans Act, r939, shall include power to raise any money required for raising any supply granted to His Majesty for the service of the year ending the thirty-first day of March, nineteen hundred and forty-five, and in addition a sum not exceeding two hundred and fifty million pounds."—[Mr. Assheton.]

Resolution to be reported To-morrow; Committee to sit again To-morrow.

PURCHASE TAX (EXEMPTIONS)

WOODEN SOLED FOOTWEAR

Motion made, and Question proposed,
That the Purchase Tax (Exemptions) (No. a) Order, 1944, dated 1st April, 1944, made by the Treasury under Section 20 of the Finance (No. a) Act, 1940, a copy of which Order was presented on 4th April, be approved."—[Captain Waterhouse,]

Mr. Barnes: I should like to express my support for these recommendations, because, as the Financial Secretary knows, we feel that this tax should be lifted from the purchasers as quickly as possible. But that is not really the point that I desire to make. There are two points for the consideration of which I should like to ask, and as I notice that the Parliamentary Secretary to the Board of Trade is also

present, perhaps he will take note of them. The Government are proposing to take off the Purchase Tax on wooden-soled shoes and picture frames, but I wish to take this opportunity to submit that this will impose a very definite and direct injustice upon retailers. The wholesaler is used by the Government as the means of collecting the tax, and as, under the process of removing these taxes stage by stage, we shall cover larger quantities of goods, this Motion appears to raise an issue of very great substance. It is the decision of the Government that a certain type of commodity shall be produced and the retailer finds himself compelled to stock such commodity, and his judgment as to the goods he purchases does not enter into the arrangement at all. The Board of Trade may find that they have ordered, and arranged for, the production of a commodity which the consumer will not purchase and eventually they come along and remove the tax, and the only person who is likely to suffer is the retailer left: in possession of the goods. The Treasury and the Board of Trade ought to arrange to make some refund of the tax to the retailer. It is an entirely different issue from that of a trader purchasing goods in the open market when he himself must bear the responsibility if there is a decline in price.
Here the decline in the price of the commodity is determined by Government policy and it is the tax which is at issue. Is it desirable or just that the retailer should be used to collect the tax, which the Treasury receives, and that when a cut in price takes place the retailer should be the one who suffers? While welcoming a reduction in the price which the removal of the Purchase Tax will make, the trade feel that the removal of the Purchase Tax will not of itself result in the sale of wooden-soled shoes. As far as I have been able to gather from a very wide circle of experience in the trade, women, in particular, place almost as much value on coupons to-day as they do on price, because they are the means whereby they actually get the commodity. We wish to bring to the notice of the Board of Trade the fact that the removal of the Purchase Tax will not of itself result in the selling of wooden-soled shoes, although there is to be a drop in the number of coupons from seven to four. We urge upon the President of the Board of Trade to remove the need for coupons altogether, along


with the Purchase Tax, and then we can visualise the goods being cleared out of the shops. In the meantime I particularly want the Financial Secretary to the Treasury to take note of that other point and to avoid the injustice on retailers by first of all taking the tax in the price and then coming along and removing it and leaving them with the burden. Otherwise I am delighted to support the Order.

Sir Herbert Williams: I want to raise rather a different issue from that of my hon. Friend, who is naturally perturbed about the effect of this Order on the Co-operative movement, but I am not primarily concerned with that. I always thought the Purchase Tax was the worst tax we have ever invented. I cannot imagine any justification for it as a form of collecting revenue. Now we find the Government engaged in getting rid of odd bits of it, and what worries me is the odd bits of which they are getting rid. This proposal before us might be called a subsidy on junk. When the President of the Board of Trade, or his satellites, invent what they call utility garments—I was not thinking of my hon. and gallant Friend but of the lower orders which pervade his DepaiLinent—and find they are not very saleable, then they want to advertis2 them by reducing the price, and they indulge in the feast of reducing the tax. Shoes enable us to keep the wet out; they also enable us to walk about in comfort. They are a necessity of life. I cannot understand why, if I buy a pair of shoes with leather soles I am taxed, and, if I buy some of my right hon. and gallant Friend's up-to-date clogs I am freed of tax. It is really most unjustifiable to try to subsidise and encourage the sale of these so-called utility goods, to try to persuade the public that they are really very much better value for money because the good article contains in it a concealed tax—the purchaser never knows whether he is really being charged the right tax—and I do not understand the theory behind it.
The Chancellor of the Exchequer stood at that Box yesterday and told us with great satisfaction that, in order to keep down the cost of living, he is subsidising food to the tune of £190,000,000 per annum, I think it was, and then we have his deputy associated with the Board of Trade engaged, in most cases, in keeping a tax on essential necessities.

The Financial Secretary to the Treasury (Mr. Assheton): Reducing.

Sir H. Williams: Yes, this particular one, but I am taking the cases which they are not reducing, in other words, keeping up the cost of living by a tax on necessities. I really think this tax wants reexamining. Obviously, Mr. Deputy-Speaker, if I wander too far you will say I am making a Second Reading speech on a Bill not yet before the House, but I think I am entitled to draw the attention of the House to the theoretical principle behind the Order before us. It will be carried, because I am in favour of the abolition of this tax wherever I can bring about its reduction. I do not know whether, in the case of this footwear, before this tax was taken off, it was subjected to that mysterious, immoral process which bears the title of "Uplift" in the Board of Customs and Excise, and I do not know whether hon. Members realise what happens. When wooden-soled footwear was sold by the wholesaler to a retailer, tax was charged at a certain percentage, but if, by any chance, I bought some of this wooden-soled footwear direct from a wholesaler, my right hon. Friend's deputies in the Board of Customs and Excise would increase the tax by 10 per cent. on the ground of what they call "Uplift." I hope my right hon. Friend will tell me whether, before this Order was introduced, the principle of uplift was applied to wooden-soled footwear, because it is really a most discreditable thing the Customs are doing. I am perfectly certain that if someone would seek an injunction against them—I have not enough money for these pursuits—they would be put in a great difficulty, because they have persistently misinterpreted the valuation Section contained in the pertinent Finance Act. I do hope my right hon. Friend will look into this point.

Mr. Woods: I rise to welcome the hon. Member for South Croydon (Sir H. Williams) into the ranks of those who realise that the Purchase Tax is an altogether bad thing, which, I hope, will be progressively removed by the Chancellor of the Exchequer. Some of us mentioned this in the Debate when this tax was first introduced. It is vitally important that there should be no injustice to those tradesmen who have been, and are, responding to the encouragement


of the Board of Trade to handle these commodities. Many have made great displays and have encouraged their customers to help the national effort by buying these goods. It is a poor way of showing gratitude to leave tradesmen with stocks for which they have already paid the wholesalers and are now being faced with losses. I therefore hope that the Board will devise some process whereby those who have taken stocks of the various goods will be able to assess their losses and have their claims met by the Board.

The Parliamentary Secretary to the Board of Trade (Captain Waterhouse): The House may like to know the past history of this Order, which has been welcomed and criticised almost in the same breath and from the same mouths. In the middle of last year we were faced with a world shortage of leather, and especially of bend leather for soling footwear. As we know only too well, the year before, supplies of rubber had been cut off completely. Thus, we were in a difficulty to know how to keep the people of this country shod, because at that time it looked as if leather supplies were becoming increasingly scarce. So, with our usual ingenuity in the Board of Trade, we thought of getting wooden soles made to take the place of the absent leather. With their usual collaboration manufacturers worked with us on this problem with great ingenuity, with the result that between 150,000 and 200,000 pairs of women's wooden-soled shoes have been produced each month, which is a very considerable contribution to this emergency.
In the middle of last August coupons for leather footwear were increased because we wanted to be sure that only those who needed boots and shoes would buy them. Women's footwear was increased from five to seven coupons. No alteration was made at this time in wooden-soled footwear but—and this point partially meets the question raised by the hon. Member for East Ham, South (Mr. Barnes)—in November they were downpointed from five coupons to four. [An HON. MEMBER: "Not sufficient."] Well, in our view it is as much as we ought now to afford, because we do not want to push these shoes on to the market: we want to have them there, because we are shorter of footwear than

any other article of clothing, and it is a great safeguard to the country to know that there is a stock of wooden-soled shoes to meet an emergency if leather supplies again become much worse.

Mr. Barnes: The right hon. and gallant Gentleman's statement now is that the purpose really is to hold these as reserve stock. It is unfair that the tradesmen should have their capital locked up and lose their margin of profit.

Captain Waterhouse: We have to hold a balance in these things. We do not want them all to be held as stock or all to be thrown on to a market which does not need them. We want to fix the pointing at: a level which will enable people who need shoes to afford them out of their ration, but not to encourage those who do not need them to buy them unnecessarily. We think that with the present pointing the balance is about right. At present that is our view. It may be that as the years roll by an alteration will take place, but I hope the hon. Gentleman will not unduly press me on that.
On the other point, utility footwear was always free of Purchase Tax, and quite clearly the obvious way to deal with these shoes which are essentially utility shoes would have been to include them in the utility schedule, and that is what my right hon. Friend advocated and what we endeavoured to do, but there are certain reasons why it is impossible. You need a fairly precise specification before you can make utility garments and it was difficult to get a precise specification in the early stage of the manufacture of these shoes. Each manufacturer was really an inventor. They were experimenting, and we were asking them to make the best job they could in their own way, and we did not find it possible to make precise specifications. Furthermore, before one can have a utility commodity one has to fix a price and it was, for the reasons that I have stated, impossible to fix a price with any accuracy. Therefore, we came rather reluctantly to the conclusion that these shoes could not be dealt with by the ordinary process, and we have come to the House to ask for this Order. Its effect will be to decrease the price by something between 2S. and 5s. The price of the shoes is something between 21s. and 55s. a pair. I appreciate the hon. Gentleman's argument on hardship


grounds. There is always a hardship when a tax is removed, but I can see no way of obviating it. After all the retailer is in no way forced to reduce his price, although competition may make it necessary for him to do so. Furthermore, if he had to reduce his price on a pair of shoes sold at 21s. the margin of profit would be something like 6s. 6d. and the amount of tax he would lose would be something like 2s. I realise that it is some hardship to him, which we would avoid if we could, but we cannot as yet find a way to do so.

Mr. Woods: Has the right hon. and gallant Gentleman considered the possibility of empowering the wholesalers to supply replacement with rubber or other material soles which are still subject to the tax so as to compensate?

Captain Waterhouse: I do not quite take the hon. Member's point. The whole point is that we are so short of shoes that we can hardly keep the market covered either with substitute rubber or leather shoes; therefore the wholesalers would be unable to replace wooden soled with leather shoes.

Mr. Woods: I am not asking them to replace straight away. It is the wholesaler who pays the Purchase Tax, and if he holds the credit for so many under some licence by the Board of Trade there should be no difficulty.

Captain Waterhouse: I think there would be material administrative difficulties in asking retailers—

Mr. Woods: There need Abe no difficulties, as they take sufficient supplies in the normal course of business. They would have supplies and they would be treated for the time being as utility or non-Purchase Tax commodities. They all have to be classified and there would be no difficulties.

Captain Waterhouse: No difficulties are insuperable, but I can see many administrative difficulties. The wholesaler would have to go to the Treasury and ask for the tax to be returned. I will examine what my hon. Friend has said and if it provides any possibility of a solution of the difficulty we will discuss it, but I do not think it will because we have looked at this matter from all angles. My hon.

Friend the Member for South Croydon (Sir H. Williams) raised the matter from a rather different angle. He obviously is not a great advocate of uplift in this connection,. though in many other directions he is one of the greatest advocates of it in this House. His main point was that we were keeping up the cost of living by a tax on necessities, but I assure him that he has got the thing completely the wrong way round, which is very unusual for him. On all these utility articles we have taken the tax off with the very object of keeping the price of necessities down.

Sir H. Williams: My right hon. and gallant Friend has missed the point. If an article is a necessity and is not designed by the Board of Trade you put the tax on, but if it is designed by the Board of Trade you take the tax off. I do not see why necessities like shoes should be taxed at all.

Captain Waterhouse: The Purchase Tax was not imposed as a luxury tax but as a revenue tax, and as such it has and is fulfilling a useful function. The Chancellor of the Exchequer is a many-sided man. On one side he has to raise revenue, and on the other side he has to look after the cost of living. Therefore, be very properly puts the Purchase Tax on many things in order to raise revenue and takes it off certain other necessities in order to keep down the cost of living. Again, it is a question of balance, and I think that on the whole even my hon. Friend will agree the balance is not an unhappy one.

Mr. Woods: I would like to remind the right hon. and gallant Gentleman that the Purchase Tax on motor car tyres was removed. A person can go about in a motor car on rubber tyres which have not paid Purchase Tax, but if he walks about on rubber soled shoes which are not made to the Board of Trade specification he has to pay tax. I do not see where the equity comes in in an arrangement of that kind. The tax should be removed from footwear altogether.

Captain Waterhouse: Tyres are happily not the responsibility of the Board of Trade. It is not possible for anybody to buy a motor car and drive about in one. I do not think, therefore, that there is any parallel between motor cars and footwear.

Question put, and agreed to.

Resolved:
That the Purchase Tax (Exemptions) (No. 2) Order, 1944, dated 1st April, 1944, made by the Treasury under Section 20 of the Finance (No. 2) Act, 1940, a copy of which Order was presented on 4.th April, be approved.

PICTURE FRAMES

Resolved:
That the Purchase Tax (Exemptions) (No. 1) Order, 1944, dated 1st April, 1944, made by the Treasury under Section 20 of the Finance (No. 2) Act, 1940, a copy of which Order was presented on 4th April, be approved."—[Mr. Assheton.]

ARMED FORCES, ACCIDENTAL DEATHS (DEPENDANTS)

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Pym.]

Mr. E. P. Smith: On 16th March I put the following Question to my right hon. Friend the Minister of Pensions:
Whether he will consider instituting a fund from which pensions can be paid in cases of proven necessity to the dependants of members of the Armed Forces killed while on active service through their own negligence or misconduct.
To that Question my right hon. Friend returned me this answer:
I do not feel justified in adopting my hon. Friend's suggestion. As he is no doubt aware I have power, in those cases where payment at the full rate would not be justified, to make a modified award. It is only in exceptional cases that I am constrained totally to withhold the grant of a pension."—[OFFICIAL REPORT, 36th March, 1944; cols. 389–10, Vol. 398.]
I should like to give the House a picture of the instance which has inspired my interest in this subject. About 10 years ago there lived in my division a small family of Scottish folk consisting of father, mother and son. I do not wish to give their names, but will refer to them by the letter "A." The father had served in the Royal Navy, and I think he must have been a man of some character because I understand that at one time during the last war he was personal servant to Admiral of the Fleet the late Lord Jellicoe. About the time of which I am speaking things were not very bright over here, and the father got the chance of going to South Africa as house steward to the Governor-General. He talked it

over at home, and he decided to accept it. He hoped to save enough money to provide for his old age and that of his wife. Unfortunately, through an oversight or omission on his part, he ceased to be a National Health contributor.
After he had gone, the boy joined the Army in order to see the world, as so many youngsters were then exhorted to do. He was only 15½ and was a well setup lad. He over-stated his age. He soon saw active service in Palestine. After some years his father fell ill and died in South Africa. During his illness, the boy allowed his mother 10s. per week. At the father's death, the widow found herself without a widow's pension. Shortly afterwards, early in 1941, came the news that the boy had been killed in the Middle East. The whole armoury of fate seemed to have been directed against this unhappy woman. She waited for a pension in respect of her son. Nothing happened. She then applied for it without avail. Then she turned to me. I was convinced that there had been some oversight on the part of the Ministry of Pensions and I took the matter up with the right hon. Gentleman.

Mr. Kirkwood: Was she back in Britain by this time?

Mr. Smith: She had not gone abroad. She had remained all the time in my division. The father and the son had gone abroad. I received the following letter from the right hon. Gentleman's Department:
As you are no doubt aware, the primary condition of the award of pension in respect of a member of the Forces dying from wounds or injury is that death can be certified as attributable to service. There is a further provision concerning misconduct on the part of a member, to which I shall refer later. As Mrs. A. says that her son was killed in action, I think it may be taken that, so far, everyone has kept the facts from her, out of consideration for her feelings, and when you have read what follows I think you will agree that it would be undesirable to add to her distress by going into details at this stage.
The letter goes on to say that Private A., on the night of Saturday, 10th May, 1941, was a member of a party of soldiers who had stayed in a canteen in Egypt until closing time. Then subsequently, on their way back, I have no doubt a little merry, a little elevated, they came in contact with a sentry. The sentry challenged them three times, but in spite of that they took no notice. He fired, and Private A.
and one of his comrades were killed. This letter goes on to say:
The high military authorities which considered the evidence given at the inquiry state that no blame could be attributed to the sentry, and they were further of the opinion that the party of men intended to interfere with a guard in a camp other than their own.
Private A. was not on duty at the time, and no grounds can be found upon which it would be possible to regard his death as attributable to his military service. This being so, I am very sorry that Mrs. A. is not eligible for a dependant's pension from this Ministry.
The letter goes on to explain at some length that Mrs. A. has the right to appeal, but that if she exercises that right there is not the smallest chance of success. It concludes by expressing the right hon. Gentleman's great willingness to see me and discuss the case with me.
I went to see the right hon. Gentleman, and I told him that I considered that the tragic farce of keeping the mother in ignorance of the true fate of her son for 2i years had gone on long enough. I volunteered to see her and tell her, as gently as I possibly could, the true story. The right hon. Gentleman was good enough to leave the matter to my discretion. He went on to say that there were unofficial ways and means by which he could help her. Therefore, I went to see her. I found her to be a fine type of Highland Scotswoman, aged 58, ill, wan, recovering from a very serious operation. She is living in one room in somebody else's cottage. She works as a part-time, very nearly a whole-time, domestic servant. Her wages—she probably is not up to heavy work—amount to £1 per week. She walks three miles to her work every day and three miles back in the evening. She has to pay her lodging and part of her board out of that £1 a week. I told her as tenderly as I could the story of her son. She was silent for a long while. Then, she said, "I suppose if they say so it is so. He was na' like that at home. He was a good son to me." She then said that she would not, of course, press her claim for a pension. She thanked me very touchingly for having told her the truth. I asked her if she had any other relatives. "Yes, one son." But for 20 years he had been estranged from his father and mother, and, she said, "I couldna' and wouldna' look for help from him." I suppose I ought to have

mentioned those two deadly words, "public assistance." But somehow I could not; and, anyhow, she was not the sort. As I walked away from that house there floated back into my mind an old Greek epigram which I learnt at school, and which means, roughly translated, "The gods have dealt ill by you." I submitted my report to the right hon. Gentleman. I concluded with these words:
I very much hope that you may find it possible to assist her from some fund or other, for, indeed, hers is a tragic case. She has lost both husband and son. Both of them contributed to her support and now she is entirely without any sort of pension. I commend her most cordially to your good offices.
Here I should like to pay a tribute to the kindness, the courtesy, and the sympathy of the right hon. Gentleman. Indeed, if words were golden, my unhappy constituent had been a well-provided woman. Unfortunately, they are not. Under the date 25th February, I received the following letter from the right hon. Gentleman:
Following the receipt of your letter of 31st January, I arranged for further inquiries to be made into the case of Mrs. A, in order to ascertain whether she could be given a grant from the King's Fund. As a result you will be glad to know that I have been able to authorise a grant of £5 5s. from the Fund "—

Mr. Kirkwood: £5 5s. a week?

Mr. Smith: No, a grant of £5 5s.
—out of which £2 5s. is for clothing and shoes, and £3 for extra nourishment, to be disbursed at the rate of 5s. weekly for 12 weeks. This grant will be paid through my chief regional officer at Tunbridge Wells.
When I received that letter, I felt that I would rather have given that poor woman £5 5s. out of my own pocket than that she should have received such a pitiful donation, in such tragic circumstances, from a Fund calling itself the King's Fund. That letter proves two things: it proves that she is insufficiently fed and that she is insufficiently clad. Wordsworth said that there
is one fate worse in life than being a Prodigal's Favourite, and that is to be a Miser's Pensioner
I do not charge the right hon. Gentleman with meanness: nobody who knows him would do that. He is circumscribed by the resources of the Fund. I understand that they are not very great. But the right hon. Gentleman is a member of a very rich Government; and I suggest to the Government that it is a bad thing


for any Administration to be associated with an action which, to those who do not understand fully its limitations, must appear mean and contemptible. If generosity upon a suitable scale is impossible, it is sometimes better not to be generous at all. I have no time to argue from the particular to the general, except to say that we all know the arguments —arguments of discipline, the arguments of honour—weighty arguments, I admit—which can be urged against a larger and a more liberal outlook and approach to this problem. But we in this House, who are, after all, the representatives of the people, are brought into contact with the human side of these things. We see the reverse side of the medal. I 'know that this poor woman has suffered quite as much as if her son had died winning the V.C. Indeed, I know that she has suffered infinitely more, and to that mental suffering there must now be added a lifetime of physical deprivation. I know that lack of food and clothes are lesser evils than the loneliness and the sense of shame, but they make the loneliness and sense of shame all the harder to bear. They sharpen the knife. The last question I wish to postulate is this. Are we justified, in considering these cases of death as the result of culpable negligence or misconduct, in making a whipping boy—for that is what it amounts to—a whipping boy of the poor offender's poor dependants? For my part, I think not.

Mr. W. J. Brown: We have listened to a very moving appeal from the hon. Member for Ashford (Mr. E. P. Smith). All I want to do is to say that, on the facts as given by the hon. MOM-her, this case ought never to have been turned down by the Minister of Pensions.

Mr. Bartle Bull: It ought never to have been brought up.

Mr. Brown: I say it ought to be brought up, because it should never have been turned down. The Minister of Pensions, under the Royal Warrant, has authority to give a pension where death is attributable to military service. If this man had not been in military service at that particular place, at that point of time, he would not have died. I argue that this is a clear case of death attributable to military service, and that, therefore, the Minister has no right whatever to reject that claim.

Mr. Bull: Does the hon. Member not think that we ought to look after the dependants of those who die properly in action before we look after these cases?

Mr. Brown: I have not said a single word against looking after the relatives of those who die in action. For my part, I have taken some share in trying to get other people to do that. I say that, on the facts as revealed to this House, this case ought never to have arisen.

The Minister of Pensions (Sir Walter Womenley): I want to thank my hon. Friend the Member for Ashford (Mr. E. P. Smith) for the reasonable way in which be has put his case, which was certainly very eloquent, but not quite in accordance with the facts as they are given to me. We shall have to balance that up afterwards; we cannot argue it across the Floor of the House. I will give the facts of the case to the House as I understand them. First, I want to make it quite clear what my powers are in awarding a pension where there has been misconduct. Whenever war pensions have been debated in this House, those who pleaded for an extension of pension benefits to those who meet their death, not by ordinary military service, but because of accidents and so forth, have always said quite clearly "We do not want to include misconduct in this; we do not want to condone misconduct in any circumstances." That has been the general feeling.

Mr. Kirkwood: We are appealing for the dependants.

Sir W. Womersley: If the hon. Member will allow me, I will read from the Warrant:
The Minister may withhold, cancel or reduce an award which may be, or has been, made under this Warrant in respect of disablement or death of a member on military service in any case where injury or disease on which the claim is based was either caused or contributed to by the serious misconduct of the member, or any case in which the death of the member was caused by or attributed to.
Let me make it clear that it is not attributable to service in any circumstances whatever, and that is the finding of the military court, and I am bound by that decision.

Mr. W. J. Brown: It does not say that the right hon. Gentleman "must" but that he "may."

Sir W. Womersley: I know, and I have to deal with cases on their merits, and I have dealt with them on most sympathetic lines, as many hon. Members can testify who have brought cases to me. In the case of a wife where there have been extenuating circumstances, I have exercised the Royal Warrant to the fullest extent. It is well known that during my administration every consideration has been given to these cases, but one comes across cases where it would be wrong on my part not to deal with them in the way that I have had to deal with this case. The hon. Member for Ashford has stated his case, and I want to give my story, as I got it from the military records and from the evidence of witnesses. I am very reluctant to spread the details of these cases, and I try to settle them with hon. Members privately and come to a decision. I agree with the hon. Member for Ashford that this poor woman in question has to suffer certain hardship because of the loss of her husband, and a boy is killed, and it adds to her anxieties to know that he was killed in circumstances which were not altogether honourable.
Let me give the full story. This man, as the hon. Member said, was a Regular soldier with six years' service and must have known what it meant to be on sentry go and the duty of a sentry. He was with some companions and they left a canteen—there is no question about it, they were under the influence of drink—and made towards the entrance of another camp belonging to another unit altogether, where the sentries had been specially warned not to allow anyone to approach the camp. There was no excuse for a Regular soldier along with other companions to make what appeared to be an attack upon this camp. He knew his business. Boys who have joined up recently would have been entitled to some consideration because they would have had no military experience. These men were challenged by the sentry and ignored the challenge and advanced threateningly towards him. This was the evidence at the court of inquiry. The sentry fell back, repeated his challenge twice, and then he did the right and proper thing—he fired a shot into the air as a warning. No one could say there was not sufficient warning given by the sentry, but as the men continued to press on, he had no alternative but to fire in

their direction, and, unfortunately, the result was fatal. I cannot think that the House would feel that the death of this man really could be described as being attributable to his military service.

Dr. Morgan: Why not? Who supplied the drink?

Mr. Bull: Not the Army, that is certain.

Sir W. Womersley: No, and they were certainly not compelled to take it.

Mr. W. J. Brown: Ministers occasionally have a drink and we do not shoot them.

Sir W. Womersley: If, after having had a drink, I attacked the hon. Member in a way that was menacing, and he did what he was instructed to do, acting as a sentry, I would be to blame and not the hon. Member.

Mr. Manning: But the Minister surely realises that it is the mother for whom we are trying to get something done?

Sir W. Womersley: Let me come to that. There are many cases quite as bad as that and I could give more extracts from the court of inquiry, but I do not want to press it too hard. Really and truly, however, it is one of the worst cases I have ever had to handle since I have been at the Ministry. Realising that the parent or the widow cannot help it if the man does something wrong, I go to the utmost extent in the consideration the law allows me to give them. There is a little point here which I shall have to check up with my hon. Friend the Member for Ashford, because the latter would have led me to believe that the father was alive at the time the boy died. The distress of this woman is not caused by the loss of her son but by the loss of her husband, because he had allowed his insurance under the National Health Insurance Scheme to run out and had not taken advantage of the offer made to all persons who had been insured in 1937 to become voluntary contributors. Her trouble is that she cannot get a contributory pension from the Ministry of Health. An attempt has been made, but his insurance payments had lapsed, and therefore he was out of benefit and she is in this very difficult position. There again I shall have to check up with my hon. Friend, because I want to get this quite clear. My evidence is that this boy never


contributed anything whatever. We shall clear that up but, as I say, there is no evidence that he made any Army allowance. The hon. Member says he did, but the military authorities ought to know. However, we will have it checked very carefully.
As I say, according to our records there was no contribution from the boy at all and possibly, when the father was alive, there was no need for it. If the report I have is correct, the father died at a date later than the boy. If the mother had been able to get a contributory pension in the ordinary way there would not have been the difficulty she is experiencing now, because she would have got supplementation when she reached the age of 6o, and therefore the ordinary social services would have worked for her benefit. But, in spite of the fact that there is no contribution made, we ignore that factor—though it is a factor in determining the amount that shall be given, because after all we have to take into account, according to the Royal Warrant, what the boy had allowed. But where there is no allowance we still make allowance if there is a need for it, and

that is a point which we watch very carefully in dealing with these cases.
My contention is that this woman's trouble really comes about because her husband was not an insured man at the time of his death, and therefore she has not a pension because he was not in benefit. If my facts are not correct and if my hon. Friend can check them up with me and we find that the boy did make a contribution, or if it is true that the father died before the boy and he was a widow's son at the time he was serving, we will go into the matter again. I want to make it quite clear that in dealing with all these cases the utmost consideration and sympathy are exercised, but there are certain cases where it is absolutely necessary in the interests of Army authority, that we should take into account this gross negligence.

It being half an hour after the conclusion, of Business exempted from the provisions of the Standing Order (Sittings of the House), Mr. DEPUTY-SPEAKER adjourned the House without Question put, pursuant to the Standing Order, as modified for this Session by the Order of the House of 25th November.